Sugar #11 Futures Market News and Commentary
Mar NY world sugar #11 (SBH20) on Friday closed up by +0.10 (+0.84%), and Dec ICE London white sugar #5 (SWZ19) closed up by +8.90 (+2.89%). Sugar prices posted moderate gains Friday with Mar NY sugar at a 1-week high and Dec London sugar at a 2-week high on fund short-covering. Rabobank on Wednesday projected that EU 2019/20 sugar output will fall -2.8% y/y to 17.5 MMT. London sugar also has support on speculation the upcoming delivery of Oct futures, which expire Friday, will be smaller than expectations, which has bolstered short-covering in London sugar futures. In a potentially bullish factor for London sugar prices was Friday's weekly Commitment of Traders (COT) data showed funds boosted their net-short position by 848 positions in the week ended Sep 10 to 37,342 net-short sugar positions, a record high in data going back to 2011, which could provide fuel for a short-covering rally. Another bullish factor for sugar was data from Unica on Tuesday that showed sugar production in Brazil's Center-South region in the 2019/20 marketing year through August fell -4.85 y/y to 17.971 MMT. Unica projects that increased ethanol output in Brazil will cut Brazil 2019/20 Center-South sugar production by -5.7% y/y to 25 MMT, a 14-year low. Mar NY sugar prices on Thursday posted a contract low and the nearest-futures contract (V19) dropped to an 11-1/2 month low on the outlook for robust sugar supplies to persist. The International Sugar Organization (ISO) on Monday said that a global sugar deficit for 2019/20 will be insufficient to erase huge global stockpiles since a "war on sugar" is hurting sugar consumption. ISO on Sep 2 said it sees global 2019/20 sugar production falling by -2.3% y/y to 172 MMT. ISO also cut its 2018/19 global sugar surplus estimate to +1.7 MMT from a previous estimate of +1.8 MMT and projected a 2019/20 global sugar deficit of -4.8 MMT. Concern about larger exports from India is undercutting sugar prices. India's government on Aug 28 approved extending sugar subsidies to subsidize exports of as much as 6 MMT of sugar in 2019/20, which is bearish for sugar prices since those exports will add to global sugar supplies. India is struggling to reduce near-record sugar ending stocks that are expected to be at 14.2 MMT on Oct 1, which is the start of the 2019/20 sugar season, and are expected to increase to 16.2 MMT at the start of the 2020/21 sugar season. Big Picture Sugar Market Factors: World sugar production in 2019/20 (Apr/Mar) will climb +1% y/y to 180.7 MMT (USDA) after the +0.6% y/y rise to a record 185.2 MMT in 2018/19 (ISO). The world sugar surplus in 2018/19 fell to 1.7 MMT from the larger 2017/18 surplus of 7.3 MMT (ISO). ISO projects global 2019/20 sugar production of 172 MMT, down -2.3% y/y and a global 2018/19 sugar surplus of +1.7 MMT will turn into a deficit of -4.8 MMT in 2019/20. 2019/20 Production by Brazil, the world's largest sugar producer, in 2019/20 will climb by +17.4% y/y to 34.1 MMT, after production in 2018/19 (Apr/Mar) fell -17.2% y/y to an 11-year low of 31.4 MMT (Conab). Production by India, the world's second largest sugar producer, in 2019/20 will fall -15% y/y to a 3-year low of 28 MT due to drought and a delayed monsoon season (India's National Federation of Cooperative Sugar Factories Ltd).