Sugar falls as Indian output data signal less need to import
Sugar futures fell sharply, with New York raw sugar dropping as much as 3.5%, as early Indian production and profit-taking weighed on prices. India produced 845,000 tonnes by October 31, over eight times last year’s level, while speculative fund liquidations and bearish currency movements added pressure.
Sugar slid at the open on Tuesday after data showed Indian production is running well ahead of last season following an earlier start to the harvest. Profit-taking also added to the slide.
Raw sugar futures in New York fell as much as 3.5% to their lowest price since late September. White sugar dropped in London.
India had produced 845,000 tons of the sweetener as of Oct. 31 this season, more than eight times the amount produced in the same period last year, data from the National Federation of Cooperative Sugar Factories Ltd. showed. That could indicate lower reliance on imports, at least in the short term.
India is ramping up production to keep domestic prices in check at a time when stockpiles are low. Still, cumulative output is expected to remain weak amid fears that a super El Niño will curb yields and push the global sugar market into a deficit.
The South Asian nation’s strong start to the season is not a surprise, according to Delhi-based analyst Harsh Soni of Greenleaf Consultancy. “But when reality strikes, markets react,” he said.
Meanwhile, speculative funds have piled into sugar over the last few months, sending the sweetener to multi-year highs. However, that rally has shown signs of reversing recently, with a surprise presidential election victory for incumbent leftist Luiz Inácio Lula da Silva triggering a selloff in the Brazilian real and adding to bearish sentiment.
The latest CFTC positioning report on Friday showed money managers trimmed their net-long position by more than 40,000 lots to around 180,000 — a four-week low.
“The October rally was driven more by speculative flows and weather-related risk premiums than by genuine physical tightness,” said Pierre-Jean Chiaradia, commodities portfolio manager at Singapore-based investment firm Conda Capital Pte Ltd.
The sell-off is also at risk of being exacerbated by a lack of buying at lower prices, he added.
Speculative funds with large long positions were stopped out of bets on a sugar rally after the sweetener sank with the currency, according to Arnaud Lorioz, chief executive officer of Paris-based brokerage Deepcore. “When you look at the fundamentals, nothing has changed,” he said. “The question is at what time this snowball effect loses momentum.”
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Source : Moneycontrol
