Mumbai, 4 Mar (Commoditiescontrol): Sugar prices exteded ter strea f losses for the trd week in a row, feeling the pressure from robust Brazil lifted sugar cane prospect as improved weather condition is expected to boost sugar mills operating at full steam. That's bearish for natural sweetener which is currently undergoing correction in prices after having reached highest level over a decade last month.
ICE raw sugar prices retreated lower on Friday, their second straight session of decline, as large delivery settlement of March contract indicates sluggish demand for natural sweetener. Also, strong Brazilian output alongside drop in Real against the dollar, encourages export selling by Brazil's sugar producers.
ICE sugar futures for March delivery settled down 0.60 cents or 2.77% at 21.98 cents per lb. Last week, the contract hit its lowest since mid-January at 22.71 while losing 1.4% week on week.
May London white sugar contract fell $12.50 or 2.03% at $602.60 a metric ton. March contract which expired last Wednesday and witnessed a total of 261,950 metric tons of white sugar tendered.
Apart from the large delivery settlement, the recent rally in sugar prices also ignited profit taking. On Wednesday, ICE sugar rallied to a 2-week high, and London sugar climbed to a 1-week high following the International Sugar Organization (ISO) forecast of global sugar deficit. It has more than doubled its 2023/24 global deficit estimate to 689,000 MT from a November estimate of 335,000 MT.
Sugar enjoyed carryover support from Monday when Sucden predicted that India's 2024/25 sugar production would fall 15.3% on year to 28 MMT.
Helping the natural sweetener in recent times is softer dollar while the fall in crude oil price applied check. Cheaper oil encourages sugar cane crushig for sugar.
Dealers said that some traders seemed to have changed their minds about the amount of sugar they were willing to receive, one reason for the large sell-off in the session.
March deliveries were seen at 25,751 lots, or around 1.3 million metric tons, according to preliminary information from traders, with Wilmar seen as the largest deliverer.
Talk that India's crop could be slightly larger than expected contributed to the decline in prices and has prompted some to expect a global surplus in the 2023/24 season.
Tereos on Monday forecast that the cane crop would fall below 600 million metric tons from 660 million in 2023/24 because of insufficient rain.
Traders said that open interest in the spot month is still high at over 47,000 lots with only two trading days left before the expiry.
Stronger than expected sugar production in Thailand, however, has helped to keep a lid on prices.
In fact, for entire previous week the sugar complex maintained softer tone with sugar price dropping to one-month low, as significant increase in Brazil's sugar production applied pressure. The forecast was resposible for seting a negative tone.
Dealers said there was concern that lower rainfall in the key Centre-South region of Brazil would lead to a decline in production in the upcoming 2024/25 season.
Sucden forecast 2024/25 CS Brazil sugar output would total 40.8 million tons, a year-on-year decrease of 1.8 million tons.
French sugar producer Tereos expects Brazil's CS new sugarcane crop at under 600 million tons compared to 660 million tons in 2023/24.
Raw sugar prices are expected to post an annual gain of nearly 20% in 2024, a Reuters poll showed.
Earlier this month, Sugar prices surged to multi-month higher finding support from consulting firm Safras & Mercado cutting its 2024/25 Brazil Center-South sugar cane crush estimate to 650 MMT from earlier forecast of 670 MMT, citing drier-than-normal conditions.
Analyst Green Pool downgraded its forecast for the 2024/25 cane crop in CS Brazil late last week, saying that some yield potential had already been lost.
StoneX raised its 2023/24 global sugar surplus estimate to 3.4 MMT from a previous estimate of 730,000 MT due to increased sugar output in Brazil.
The global sugar deficit is expected to widen to 788,000 tons in the 2024/25 year, meaning supplies will remain tight and prices are likely to stay high, analyst Green Pool said on Tuesday in its initial forecast for the crop year.
Commodity Futures Trading Commission (CFTC) data on showed speculators have added 5,950 contracts to their net long position in raw sugar to 13,107 lots.
As observed in the previous week report, the weather conditions in the sugar cane growing region posed challenges in recent time. Several industry reports including Unica, have pegged a sharp rise in Brazilian sugar production. That should help cut global deficit prospect. However, the drought conditions in growing region such as Thailand remains a concern. Traders have started changing their bearish views recently. Meanwhile, analysts are forced to readjust their production estimates and availability of the sweetener. Overall, the bullish price pattern remains unaltered though funds have decided to increase their short position. A clarity on production is necessary before taking a fresh bet.
As observed in the previous week report, the weather conditions in the sugar cane growing region posed challenges in recent time. Several industry reports including Unica, have pegged a sharp rise in Brazilian sugar production. That should help cut global deficit prospect. However, the drought conditions in growing region such as Thailand remains a concern. Traders have started changing their bearish views recently. Meanwhile, analysts are forced to readjust their production estimates and availability of the sweetener. Overall, the bullish price pattern remains unaltered though funds have decided to increase their short position. A clarity on production is necessary before taking a fresh bet.
For Monday, support for the May Sugar contract is at 20.74 cents and 20.39 cents, with resistance at 21.66 cents and 22.23 cents.
(By Commoditiescontrol Bureau: 09820130172)
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