Mumbai, 21 May (Commoditiescontrol): ICE sugar prices surged on Monday as a stronger Brazilian real sparked fund short-covering in sugar futures. The real climbed to a 1.5-week high against the dollar, discouraging export sales from Brazil's sugar producers. The July delivery of raw sugar rose by 0.55 cents, or 3.03%, closing at 18.68 cents per pound, extending the market's rebound from last week's 18-month low of 17.95 cents. Despite this recovery, the contract still lost 6% over the previous week. In London, the August ICE white sugar contract gained $16.10, or 3.01%, to close at $550.80 per metric ton.
Dealers noted that speculators had been increasing their net short positions due to a strong end to the harvest in Thailand and a rapid start to the cane harvest in Centre-South Brazil. However, there were reports of commercial buying and rumors of Chinese purchases in the physical market. Additionally, Egypt announced a tender for raw sugar, further supporting prices.
The recent bearish trend was primarily driven by the robust start of the sugar harvest in Centre-South Brazil. According to the sugar industry group UNICA, production in this region reached 1.84 million tons in the second half of April, an 84.25% increase from the same period last year, attributed to drier conditions.
Adding complexity to the market dynamics, Australia's largest sugar producer, Wilmar Sugar, announced that strikes by its employees would delay the start of cane processing. Conversely, projections from StoneX and S&P Global Commodity Insights indicate significant growth in Brazil's sugar output, estimating the 2024/25 production at 42.3 million tons.
Globally, shifts in production are impacting the sugar market. Datagro forecasts a modest global surplus of 1.62 million metric tons for the 2024/25 season, reversing the previous season's deficit, driven by recovering production in Thailand and increased output forecasts from China. Meanwhile, India's sugar production saw a 1.6% year-over-year decrease as of April 30.
Speculators increased their bearish bets on ICE U.S. raw sugar futures in the week ending May 14, according to the Commodity Futures Trading Commission (CFTC), with funds raising their net short position by 13,919 lots to 58,274.
Traders are closely monitoring these developments, with technical support for the July sugar contract seen at 18.22 and 17.77 cents, and resistance at 18.96 and 19.25 cents. With rising Brazilian production and shifting global supply dynamics, sugar prices are poised for continued volatility.
(By Commoditiescontrol Bureau: 09820130172)
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