Mumbai (Commodities Control) – NY sugar extended its weekly gains, at the end of 16th October, by 1.41%. The rise the previous week’s gains, as Sugar #11 shot up 5% for the week ended 9th October. Incessant fund buying and dry weather concerns in Brazil continue to be price positive for the sweetener.
Fund buying is driving the recent up-move in sugar prices.
On the charts, for the week-ended 13th October, speculators continued to raise their net long position in raw sugar on ICE futures by 52,056 contracts for a total net long of 264,743 contracts. It is interesting to note that net longs shot up for the fourth straight week. Having said so, while 28,002 contracts were added to the long side to 267,186, the short side slipped by 1654. Open interest was registered at 11,31,557, up 39,366 contracts.
Sugar prices rallied on Friday over concerns of low sugarcane yields in Brazil, as updated weather forecasts reduced the chance of rain over the next week in Brazil's sugar-growing areas.
Raw sugar futures gained nearly 2%. March raw sugar settled up 0.25 cents, or 1.8%, at 14.43 cents per lb, approaching the 7-1/2 month high hit on Monday. December white sugar settled up $7.80, or 2.%, at $396.00 a tonne. Meanwhile, in a month’s time frame the contract has upped 11.69%.
Dealers said uncertainty about India's export policy is underpinning sugar, as is concern over tightness during 2021's first quarter before the harvest starts in top producer Brazil.
NY sugar on Monday cracked lower heavily, after posting a 7-1/2 month nearest-futures high, due to large fund selling and tracking weakness in other agricultural commodities. However the trend reversed during the week tracking firm crude, fund buying and weather concerns in Brazil’s producing regions.
Maxar said that Brazil's sugar-growing regions have only received 5%-25% of average rain in the past few months, leaving crops "extremely dry." Sugar prices are supported by concern a La Nina weather pattern could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields.
The Thailand Sugar Mills Corp said Oct 2 that Thailand's 2020/21 sugar production would fall 13% y/y to an 11-year low of 7.2 MMT as dry weather this year ravaged cane plantations.
The outlook for a smaller sugar crop from the EU is also positive for sugar prices after the USDA's Foreign Agricultural Services (FAS) last Tuesday forecast that EU 2020/21 sugar production will fall 5.6% y/y to 16.05 MMT due to poor yields from the third "vast drought" in a row.
Sugar prices also garnered support after China, this month, raised its 2019/20 sugar import estimate. According to the China Agricultural Supply and Demand Estimates (CASDE), China will import 3.5 MMT of sugar in 2019/20, up 15% from a prior estimate of 3.04 MMT.
On the bearish side, however, the Indian festive demand is an area of concern this year. Overall festival demand is reported to have halved as compared with the corresponding period last year.
This week, particularly on Saturday, festival buying was the dominating factor for North and East Indian markets. Overall positive tone was noted in markets of northern and eastern states. Sugar prices inched up in Uttar Pradesh. Many mills hiked sugar sale price by Rs. 15-20 per quintal further. However, bearish trends persisted in the Southern and Western markets with negligible price movement.
Not to forget in the international markets, dealers noted that speculators may be running out of funds to push prices much higher. The surge in long positions also highlights the risk of long liquidation pressures.
Support and Resistance for Sugar #11 lies at 14.04 cents and 14.66 cents per lb, respectively.
Experts believe that funds have not lost their appetite in commodities for now, and unless you can flush them, it will be harder to pressure sugar down
(Commodities Control Bureau)
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