Mumbai (Commodities Control) - It was the fourth consecutive weekly decline for Sugar#11 for the week ended 19th March, as the most-active May’ 21 contract settled at 15.76 cents per lb. The contract registered weekly loss of 37 points or 2.29%. Meanwhile Sugar#5 or white sugar reported a weekly drop of 1.33%.
For the week-ended 12th march, NY Raw Sugar May’21 contract settled at 16.13 cents with a loss of 27 points or 1.65%.On the other hand there was a relatively lesser fall in London white Sugar which fell by $4 or 0.86% to close at $459.50/MT.
Raw sugar futures on ICE hit their lowest since late January on Friday amid risk-off sentiment in wider financial markets and as concerns the COVID-19 pandemic is not under control made funds wary. May raw sugar settled down 0.8%, at 15.76 cents per lb, having hit its weakest since late January at 15.55 cents earlier in the session. May white sugar settled down at $453.40 a tonne.
During the week, weak crude oil and strong dollar weighed on ICE raw sugar, as well. News of higher Indian sugar output allayed prior global supplies concerns, although slow Brazilian exports weakened the extent of decline.
India's Sugar Mills Association reported Wednesday that India's Oct-Mar 15 sugar production rose 20% y/y to 25.87 MMT. The India Sugar Trade Association on Feb 11 forecast that 2020/21 India sugar production will increase 9% y/y to 29.9 MMT.
But above all, the speculative strength has fizzled as the net longs in the managed money dropped for the third straight week. According to the CFTC report of 16th March, the net longs fell by 2690 contracts to 191,378 contracts. While the long side position rose by 2291 contracts, the short side moved up by 4981 contracts. The open interest was registered at 12,17,394 contracts vs 12,05,721 last week.
Dealers said the upsurge in coronavirus cases in Europe has given funds pause for thought and they might reassess their exposure to commodities in the short term.
German Health Minister Spahn on Friday said that Germany is in the grip of a "third wave" of rising Covid cases and "there are some fairly challenging weeks ahead of us."
On the bullish side though, Rabobank projected a 2.8 million tonnes deficit for the current crop year (Oct-Sept) and a modest surplus for 2021/22.
"Rabobank sees ongoing support for sugar prices, with the ICE #11 expected to average around 15.00 to 15.50/lb over the course of 2021".
Not to forget, Sugar prices on Thursday morning initially moved higher on stronger Chinese sugar demand. Chinese Feb sugar imports soared 90% y/y to 430,000 MT, and total China sugar imports Jan-Feb more than tripled year-over-year to over 1 MMT.
Also, sugar prices continue to have underlying support from concern about the possibility of reduced sugar exports from Brazil. Brazil reported on Feb 22 that current shipping delays for its soybean exports might curb global sugar supplies because the queue of vessels waiting at Brazilian ports is so large that bottlenecks will likely continue until May when sugar is normally the biggest crop for export.
Additionally, the sweetener has support from falling production in Thailand, the world's second-largest sugar exporter. The Thailand Office of the Cane & Sugar Board reported on March 2 that Thailand's 2020/21 sugar production from Dec 10-Feb 26 fell 15% y/y to 6.8 MMT.
Support and resistance for Sugar #11 lies at 15.24 cents and 16.26 cents per lb, respectively. For Sugar #5, support and resistance lies at $444.13 and $462.43, respectively.
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