ARE THERE ANY SURPRISES LEFT FOR SUGAR BULLS AFTER RALLIED 30%
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ARE THERE ANY SURPRISES LEFT FOR SUGAR BULLS AFTER RALLIED 30%

Kotak Commodity Services Ltd

*Prices of crude oil threatening to top $100 a barrel and ethanol playing a key role

*India is not offering as world prices are well below domestic prices


After having rallied nearly 30% this year, are there any sweet surprises left for sugar bulls before the year wraps? According to industry experts and analysts, at a webinar “Global Sugar” organized by the All-India Sugar Traders Association, with prices of crude oil threatening to top $100 a barrel and ethanol playing a key role in the convergence of energy prices, Brazil loss-will India fills the gap?

The Indian government said sugar mills have contracted to export 1.8 million ton of sweetener so far in the 2021-22 marketing year, starting from 1 October and asked industry players to ship at least 6 million ton to liquidate surplus stocks. India's mills need to export 6 to 7 million ton of sugar without government incentives in 2021/22 to bring down inventories and ensure domestic prices remain firm despite surplus production, a government official said.

But India is not offering as world prices are well below domestic prices and has had some weather problems of its own. Consumption of sugar is said to be improving from previous low levels but remains rather low. It’s worth asking, is sugar capable of a new high before the year is done, as some optimistic forecasters had predicted a few months back?

Answer that probably depends as much on current crop cultivation, weather, harvest, delivery to market, and sales and demand as technical outlooks on price. there are too many guesses works by the stakeholders which may add to the already volatile sugar market. In Wednesday’s trade on ICE (InterContinental Exchange) raw sugar’s benchmark front-month contract hit a high of 19.54 cents a pound (454 gram), off the October 11 peak of 20.61 cents, which marked a high since February 2017.

Chicago’s Price Futures Group brokerage said renewed talk of inflation coming to all commodities markets has also supported sugar. The reduced production potential from Brazil is still impacting the market. That said to counter some of these bullish factors, fourth biggest sugar grower Thailand was expecting improved production, it said. Also, in Brazil, the world’s biggest producer of the crop, rains in the southern patch of the country were improving the outlook for sugar. Brazil and India are set to produce more ethanol from sugar cane, ensuring supply of sweetener remains tight.

As Munawar Hasan wrote in The News of Lahore last week, confusion, claims (and) counterclaims blur (the) sugar outlook for 2021/22. Sugar prices soar as energy crisis boosts ethanol output. The global energy crunch is putting pressure on the sugar market as the world’s top exporters convert more cane into ethanol. The fact that the pressures on them to produce more ethanol in the next 12 months is supportive of sugar prices. That strategy could result in a drop in refined sugar production next year, the Indian Sugar Mills Association said.

(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 4-11-2021

Tri Une Impex Consultant

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