Mumbai (Commodities Control) - For the the Fifth consecutive week, Sugar #11 has suffered losses, as the most-active ICE raw sugar contract shed 57 points or 3.62% for the week ended 26th March. On Friday, May raw sugar ended up 0.7%, at 15.19 cents per lb, edging away from a three-month low of 15.01 cents set on Thursday and May white sugar settled down 0.5%, at $437.10 a tonne. For the week, Sugar #5 reported losses of $16.30 or 3.60%.
In a month’s time, ICE raw sugar May contract shed 217 points; falling from the levels near 17.40 cents per lb late in February.
Last week, the contract registered a weekly loss of 37 points or 2.29% and Sugar#5 or white sugar reported a weekly drop of 1.33%.
On Friday, NY sugar was seen consolidating above Thursday's 2-3/4 month nearest-futures low, and London sugar is consolidating above Tuesday's 2-1/2 month low.
NY Sugar is reeling under the pressure of fading net longs for the fourth straight week in a row. The speculative strength has fizzled as the net longs in the managed money dropped by 14,436 contracts from the previous week. According to the CFTC report of 23rd March, the longs fell by 7,385 contracts to 221,702 contracts, but the short side moved up by 7,051 contracts to 44,760. The open interest was registered at 12,11,200 contracts vs 12,17,394 contracts in the last week.
It is to be noted that ICE raw sugar settled in red for the major part of the latest week, barring on Wednesday and Friday.
A 4% rally in crude oil prices on Friday was positive for sugar prices. However, sugar prices were undercut by weakness in the Brazilian real which fell 1.72% Friday to a 2-week low.
Signs of abundant global sugar production are negative for prices. Unica reported on Thursday that Brazil's Center-South sugar production from Oct through mid-Mar was up 44% y/y to 38.287 MMT. The percentage of cane used for sugar rose to 46.16% in 2020/21 from 34.38% in 2019/20.
Infact, Raw and white sugar futures on ICE closed sharply lower on Thursday, also, as rising COVID-19 cases in Europe prompted a broad-based selloff in wider financial markets. May raw sugar settled down 3.5%, at 15.09 cents per lb, after equaling a three-month low of 15.05 cents set on Tuesday.
Sugar prices, as with nearly every commodity, are being undercut by demand concerns as a third Covid wave in Europe has prompted France, Germany, and Italy to widen their pandemic lockdown measures, which will reduce economic growth and commodity demand.
Early in the week, the sweetener was weighed by news of increased Indian sugar output. Increased sugar output from India, the world's second-biggest sugar exporter, is negative for sugar prices. India's Sugar Mills Association reported the prior week 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.
Having said so, an expected slow start to the harvest in Centre-South Brazil and concerns about port congestion in the South American country helped to underpin prices.
Gloomy European sugar beet farmers are cutting back plantings this year, discouraged by poor yields and low prices.
With a basketful of bearish fundamentals and fleeing speculators on charts, the question is --Where is the Bottom in Sugar?
According to Commodity Analysts Michael Seery, “Sugar prices are trading below their 20 & 100 day moving average as the trend remains the downside. ...we are close to a bottom and should be ready for a bullish position in the coming days ahead especially if we retest the 15.00 level.”
Seery adds, ‘weakness in many of the commodity sectors is running out of steam and buyers need to gear up, as there's barely a reason to be short at these depressed levels.’
Support and resistance for Sugar #11 lies at 14.99 and 15.39 cents per lb, respectively. For White Sugar, support and resistance lies at $425.40 and $450.90, respectively.
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