The expiry of the May contract on the ICE exchange saw the delivery of around 1.67 MMT of raw sugar. Singapore-based commodity trader Wilmar International was the largest deliverer of sugar and Louis Dreyfus was the main receiver.
Commenting on it, Michael McDougall, Managing Director, Paragon Global Markets, LLC, said this is the third largest delivery ever against the May contract, even though large deliveries are now becoming more commonplace.
“When Brazil is responsible for 70% of global exports of raw sugar, the May, July and October contract will largely be Brazilian sugar and with exports so far averaging almost 3.00 MMT, for the first quarter, then the delivery is equivalent to a little more than two weeks of export (larger percentage when looking at just raw sugar). When traders worry about the bearish implications of a “large delivery” the concerns are overdone. The delivery also means different things to different trade houses. Demand (absence or excess), as well as, flat price or spread manipulation”, he said.
McDougall said that in sugar it depends on how the delivery is taken. Since the market peaked on April second, we can see that open interest for Oct 24 has risen to 31,938 lots, March 25 has risen to 13,651 lots, May 25 has risen to 2,183 lots, July 25 has risen to 6,473 lots and Oct 25 has risen to 1,569 lots”.
He expects July Support in the region of 19.11, 19.06, 19.01, 18.97, 18.82 and Resistance at 19.30, 19.35, 19.40, 19.47, 19.52, 19.58, 19.62, 19.70, 1977, 19.84, 19.92.
On the sugar production outlook especially in Thailand which is battling high temperatures, he said that the 52 Degree Centigrade heat index for Thailand can’t be helping the young cane and they seem to think internally there is no rain in sight for two weeks. “Thai cane is rain-fed, not irrigated, so if the weather does not cooperate, then the sugarcane can suffer. Thailand’s crop is suffering and cane has fallen for some from 100-110 MMT to 90-95 MMT, Sugar production will be between 10.00-11.00 MMT”.
On macro-factors which tend to influence global sugar prices, he said that the crude market is wondering if a ceasefire in Israel-Palestine and Ukraine-Russia can be managed. The unstable geo-political situation in West Asia could impact crude oil prices, which may prompt sugar mills to produce more sugarcane or ethanol. In currencies, there is talk that China may devalue the Yuan though I doubt this will happen suddenly. The Brazil Real and US Dollar relation etc. could all impact the sugar prices in the future”.
In the short term, he says the markets will be interested to see the attest crop forecasts and trade house thoughts during New York Sugar Week which is slated to take place next week. “Short-term price for July is 19.00-20.00 c and London August is 550-650,”
He adds.
On Brazilian sugar output, he said that his personal view is that sugar production should be around 41 to 42 MMT while sugarcane production is around 600-620 MMT.
