Sugar #11 Futures Market News and Commentary
July NY world sugar #11 (SBN19) on Friday closed unchanged, and Aug ICE London white sugar #5 (SWQ19) closed -0.70 (-0.21%). July NY world sugar edged to a new 6-week high early Friday before falling back. Sugar prices on Friday saw downward pressure from the +0.6% rally in the dollar index and from a report from the Indian Sugar Mills Association that India's sugar mills expect to export a record 7 million MT of sugar in 2019/20 to reduce its huge stockpiles, up from 3 million MT in 2018/19. Sugar prices on Friday also saw some downward pressure as the Brazilian real fell back from Wednesday's 2-1/4 month high and closed sharply lower by -1.30%. A weaker real against the dollar encourages export selling by Brazil's sugar producers. White sugar received some potentially bearish news later Friday that money managers cut their net short position by 1,759 to 17,055 contracts, the least-short position in 6 weeks, which reduces the chances of a short-covering squeeze. Sugar saw support from Thursday's forecast by India's National Federation of Cooperative Sugar Factories Ltd that India 2019/20 sugar production will fall -15% y/y to a 3-year low of 28 MMT due to drought and a delayed monsoon season. Sugar saw support from Tuesday's news from Unica that Brazil Center-South 2019/20 sugar production during Oct-May fell -11.96% y/y to 4.856 MMT, with the percentage of sugar cane crushed for sugar falling to 33.41% from 34.45% last year and the percentage of cane crushed for ethanol production rising to a record 65.59% from 65.55% last year due to very strong Brazilian ethanol demand. On the negative side, the International Sugar Organization (ISO) on Monday raised its 2019/20 global sugar surplus estimate to 1.832 MMT from a Feb estimate of +641,000 MT.\ Big Picture Sugar Market Factors: Bullish factors for sugar include (1) lower global production after Conab, Brazil's national crop agency, reported that Brazil 2018/19 sugar output in the marketing year ended March 31 fell -17.2% y/y to an 11-year low of 31.4 MMT, (2) strong demand for ethanol in Brazil that has prompted Brazil's sugar mills to ramp up ethanol production at the expense of sugar production after Unica reported the percentage of cane crushed for ethanol production rising to a record 65.59% from 65.55% last year and that that Brazil's Center-South May domestic ethanol sales rose +50.6% y/y to 2.86 bln liters and (3) the outlook for smaller sugar production in India, the world's second-largest sugar producer, after India's National Federation of Cooperative Sugar Factories Ltd predicted that India 2019/20 sugar production will fall -15% y/y to a 3-year low of 28 MMT due to drought and a delayed monsoon season. Bearish factors include (1) Conab's forecast for Brazil 2019/20 sugar production to climb by +17.4% y/y to 34.1 MMT and that Brazil's sugar mills will increase their percentage of cane crushing to produce sugar to 39.1% from 34.9% in 2018/19, (2) the USDA's projection for global 2019/20 sugar production to climb +1% y/y to 180.7 MMT, and (3) ISO's forecast that global 2018/19 sugar production rose +0.6% y/y to a record 185.2 MMT and that there was a 2018/19 sugar surplus of 2.2 MMT (vs 2017/18's 7.3 MMT).