Mumbai, 16 Sep (Commoditiescontrol):ICE Sugar futures experienced a notable upward shift on the Intercontinental Exchange throughout the week ending September 15. This increment marks the fourth straight week of gains. A considerable factor supporting this uptrend is the anxiety over the potential reduction in sugar output from India and Thailand due to the drier weather conditions associated with the El Niño phenomenon.
Despite the gains that persisted for most of the week, there was a pullback on Friday. Following remarks from India's Food Secretary, sugar prices dipped from their 12-year high. His comments caused a long liquidation in sugar futures as he assured that India possesses adequate domestic sugar supplies to satisfy the demand for the imminent festivals. Such remarks have led to speculations that the Indian government might authorize sugar mills to amplify their sugar exports.
The most vigilantly observed contract, Sugar No. 11 for October, saw an ascent of 0.6 cents, concluding the week at 26.91 cents/lb. On the other hand, the benchmark for March escalated by 0.56 cents, settling at 27.16 cents/lb. An analysis of the spread between these contracts hints at a near-term surplus, signalled by a carry of 0.25 cents. Similarly, London's August white sugar surged by $16/Mt, closing at $730.3/Mt, with the March contract gaining by $14.8/Mt, resting at 724.6/Mt. An inverse of $5.7/Mt between the December and March contracts alludes to a potential deficit in the following months.
Brazil's sugar production update from the latter half of August brought some relief. Sugar output from its primary centre-south region increased by 9.95% year-over-year, reaching 3.46 million metric tons. This figure closely aligns with the S&P Global Commodity Insights' prediction of 3.44 million tonnes. While Brazil assures good short-term supplies, concerns arise due to the unfavourable weather conditions affecting India and Thailand's outputs.
Recent data from the CFTC for ICE Sugar #11 reveals that managed money traders had a net short of 2,02,660 contracts for the week ending on September 12. There was an addition of 5,875 contracts net long positions during the week. The open interest for the same week was at 12,87,476, an increase of 36,344 compared to the previous week.
While sugar's fundamentals remain robust, the near-term outlook suggests ample supply, primarily attributed to the surge in Brazil's production. This observation is evident from the carry-in spread for the October/March contract for ICE raw sugar. Additionally, the substantial long position by managed money hints at potential profit booking, which might cause market corrections in the future. However, the inverse position in London's white sugar contracts indicates an anticipated shortage of white sugar in the near term, which could be a limiting factor for any significant price downside.
(By Commoditiescontrol Bureau; +91-9820130172)
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