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NY Sugar Climbs to a 5-1/2 Month High on Strong Chinese Demand and Supply Concerns

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Oct NY world sugar #11 (SBV20) this morning is up +0.01 (+0.15%), and Oct London white sugar #5 (SWV20) is up +1.10 (+0.29%).

Sugar prices this morning extended this week’s rally with NY sugar at a 5-1/4 month high and London sugar at a 1-3/4 month high. Increased Chinese demand for Brazilian sugar is bullish for sugar prices and has sparked fund-buying of sugar futures. According to data from researcher Datagro, Brazil, as of August 10, had scheduled the shipment of 816,823 MT of sugar to China in the coming weeks. That is 31% of Brazil’s total sugar exports expected to ship in that period. For the year through July, Brazil has already exported 1.43 MMT of sugar to China, surpassing the total volume of sugar exported to China in 2019.

In another bullish factor, the European Commission reported July 30 that EU Oct-Jul sugar exports slumped -54% y/y to a 3-year low of 600,000 MT, indicating the reduced availability of supplies from the EU.

Sugar prices also have support on concern that the surging Covid pandemic in India may disrupt its harvest and sugar exports. Covid infections in India, the world’s second-largest sugar producer, have risen above 1 million, the third-most in the world behind the U.S. and Brazil.

Tuesday’s data from Unica was negative for sugar prices after Unica reported that Brazil’s Center-South sugar production in the second half of July rose +37.7% y/y to 3.426 MMT, with the percentage of cane used for sugar climbing to 47.94% in 2020/21 from 36.94% in 2019/20. Also, ethanol demand is weak after Unica also reported that total ethanol sales by Brazil Center-South mills in the first half of July fell -19% y/y to 741.4 mln liters, which indicates pressure for less ethanol production and more sugar production.

A negative factor for sugar is recent rain in Thailand that has eased drought concerns and prompted long liquidation in sugar futures. Thai Sugar Millers Co said some regions of Thailand had received as much as 20% more rainfall so far this year versus last year. Also, the Thai Meteorological Department has forecast above-average rain for Thailand through August and September.

Another potential bearish factor is an extremely long position from commodity funds. Last Friday’s Commitment of Traders (COT) data showed that funds boosted their net-long NY sugar positions by 54,054 contracts in the week ended Aug 4 to a 5-month high of 148,308 contracts, which could provide fuel for long liquidations pressures.

The Indian Sugar Mills Association (ISMA) on June 25 said that India’s 2020/21 sugar production would climb +17.7% y/y to 32.01 MMT as sugar acreage increased by +8.1% to 5.23 mln hectares. ISMA also projects that India’s 2020/21 sugar exports will jump to 7 MMT, up +25.7% from 5.2 MMT in 2019/20.

Ongoing demand concerns are bearish for sugar prices. Consulting firm Datagro said July 15 that about 5 MMT of global sugar consumption would be lost between March 2020 and February 2021 due to the effects of the pandemic. Czarnikow Group projects that with the closure of restaurants, sports arenas, and cinemas all over the world due to Covid lockdowns, global sugar demand will fall this year for the first time in four decades.

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