Mumbai, 30 Sep (Commoditiescontrol): Sugar prices have been on the rise in recent times, garnering support from the tight global supplies of the sweetener. Last week, sugar prices scaled a 12-year high amid concerns over falling output in top producers India and Thailand. However, the rising production in the Brazil - the World's largest sugar exporter - has applied breaks to runway price.
In fact, the ramp-up of sugar production in Brazil has pulled down Sugar prices to 4 week lows. Further, the huge liquidation pressure ahead of expiry in the derivatives markets led to the cooling off of sugar prices.
ICE raw sugar futures ended lower on Friday, slipping from the 12-year peak levels reached recently, as speculators opted to reduce their bullish bets.
ICE sugar futures for October delivery settled down 0.46 cents, or 1.7% at 26.27 cents per lb. The contract lost 0.80 cents or 2.93% during the week to Sept 29. The contract expired on Friday with a record delivery of 2.87 million metric tons, which is usually seen as bearish signal.
December London white sugar lost $10.70, or 1.5%, at $705.90 a tonne. The contract ended 3.41% lower for the week.
Dealers said the recent run-up in oil prices had not yet triggered a shift in the use of cane in centre-south Brazil. Cane can be used to make either sugar or biofuel ethanol.
Meanwhile, the sugar market was set to remain tight in the upcoming 2023/24 season, partly due to a potential drop in output in Asia linked to the El Nino weather phenomenon. Production in Brazil, however, remains near record this season with another mostly dry fortnight late in September.
Unica reported Tuesday that Brazil Center-South sugar output in the first half of September rose 8.5% on year to 3.116 MMT and that sugar output in the 2023/24 crop year through mid-September rose 18.7% on year to 29.258 MMT. Also, 49.37% of the crushed sugarcane was used for sugar production this year, an increase from 45.47% last year.
Elsewhere, Europe's sugar beet growers are turning away from the crop as the European Union's environmental rules clash with efforts to stem food inflation and secure supplies.
Over the past few weeks, sugar prices have risen sharply, with NY sugar posting a 12-year nearest-futures high last Tuesday and London sugar posting a 12-year high September 14, on concern about smaller global sugar production.
On September 5, Alvean, the world's largest sugar trader, said it expects a 2023/24 global sugar deficit of 5.4 MMT, the sixth year of shortages, as India may curb sugar exports and Thailand farmers plant more profitable cassava instead of sugarcane.
A negative factor for sugar is reduced demand from China after China's August sugar imports tumbled 46.4% on year to 370,000 MT. Meanwhile, China will continue to hold further auctions of its sugar reserves in the near future to ensure the stability of domestic price and supply, the state's reserve management centre said in a notice on Tuesday.
Speculators reduced their bullish bets in futures of raw sugar in the week to Sept. 26, the CFTC said.
Sugar has been under pressure this week on signs of ramped-up sugar production in Brazil. On the other hand, strength in crude benefits ethanol prices and could prompt global sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies. However, large number of open interest position and speculators reducing bullish bets indicates to continuation of selling pressure. Sugar prices are likely to consolidate further in the near terms.
For Monday, support for the October Sugar contract is at 26.19 cents and 25.91 cents, with resistance at 26.93 cents and 27.39 cents.
(By Commoditiescontrol Bureau: 09820130172)
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