Morning Sugar: Trade Fears Too Much India Supply; Slow Brazil Demand
Take a Free Trial of our Daily Comments, Weekly Market Letter and more! Subscribe today or Learn More
Sugar prices will start this week on a 7-session losing streak as market focus has shifted towards major Asian producing nations. Given the recent strength in key outside markets, however, sugar prices are relatively cheap at current levels and should find their footing soon. For the week, March sugar finished with a loss of 70 ticks (down 3.7%) which broke a 2-week winning streak. Sugar remained on the defensive Friday in despite another move to new contract highs in crude oil and RBOB gasoline, both of which would normally lend support on ideas that it would boost ethanol demand and pull cane crushing operations away from sugar. While Brazil's Center-South domestic ethanol sales came in below the previous year's total for the past 5 months, energy prices are well above levels seen during the 2018/19 and 2019/20 seasons when sugar's share of Center-South crushing was below 36%. In comparison, sugar's share of Center-South crushing this season so far is running just above 45%. Rain forecast for Brazil's Center-South growing regions over the weekend could improve soil moisture levels and improve the prospects for next season's cane crop, and that pressured the sugar market going into the weekend. <br /><br />India is reporting strong yields in their top-producing state of Maharashtra, and that has improved their sugar production outlook for the 2021/22 season. However, India's 2021/22 ending stocks are projected to come in at their second lowest total over the past 10 seasons, which is due in part to an increase in sugar diverted to ethanol production as mills prepare for the India government's target of 20% ethanol blending with gasoline by 2025. In addition, India's 2021/22 sugar exports are expected to decline from last season's 7.2 million tonnes, with some forecasts falling below 6 million tonnes. The Commitments of Traders report for the week ending January 25th showed Sugar Managed Money traders added 18,483 contracts to their already long position and are now net long 94,299. Non-Commercial & Non-Reportable traders added 22,164 contracts to their already long position and are now net long 144,104.
TODAY'S MARKET IDEAS
Multi-year highs for crude oil and gasoline prices should encourage ethanol demand in Brazil and India, and that in turn should provide sugar prices with support. Near-term support for March sugar is at 17.95, with resistance at 18.64.
