Mumbai, 23 Oct (Commoditiescontrol): Last few weeks posed tough challenge for sugar traders as they grapple to assess the availability of natural sweetener as demand/supply factors ruled the prices. But, things are currently tilted in favour of rising supplies with Indian producers are set to return.
ICE raw sugar prices extended decline for second straight session in a row on Friday, weighed by the prospect of India sugar exports. Further, strong sugar cane harvest in Brazil added pressure on the natural sweetener prices.
ICE sugar futures for March delivery settled 44 cents or 1.61% lower at 26.85 cents per lb. The contract ended the week at negative 0.7%. It snapped last two consecutive week of gains. December London white sugar lost $11.30, or 1.53%, at $726.50 a tonne. The contract ended flat for the week, after having added 2.55% last week.
Sugar prices on Friday extended Thursday's losses on negative carryover from Thursday when India's Food Secretary said his country is not likely to face any shortage of sugar in the domestic market, which opens up the possibility it may resume sugar exports. He has also added that India's sugar reserves as of Oct 1 totaled 5.7 MMT, enough to meet demand for 2-1/2 months, and that it will decide whether to allow sugar exports after assessing its cane production.
India is expected to produce 33.6 million metric tons of white sugar in 2023/24 – a supply level that might not meet consumption needs, FAS said.
Sugar prices have rallied sharply this year and posted 12-year nearest-futures highs last month on concern about smaller global sugar production.
On Sep 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.
In recent times, the natural sweetener has drawn support from El Nino weather event which is likely to curb production in major Asian producers including India and Thailand.
However, the gains were restricted by robust Brazil sugar output during the second half of last month. Brazilian mills produced 3.36 million tons of sugar in the second half of September, nearly double the amount seen this time last year and above analysts' expectations.
Given the sharp downturn in Indian production in 2022/23, hopes of a strong rebound in 2023/24 have been curtailed.
Meanwhile, the USDA cut again its projection for U.S. sugar production and said high-tier imports were record. The agriculture ministry in China, one of the world's top sugar consumers, kept its forecast for the country's 2023/24 sugar imports unchanged at 5 million tons. The figure compares with estimated imports of 3.8 million in 2022/23.
Last Thursday, the USDA's Foreign Agricultural Service (FAS) projected 2023/24 Thailand sugar production at 9.4 MMT, down 15% on year.
Germany's refined sugar production in the new 2023/24 season is forecast to rise to about 4.36 million metric tons, up some 12.9% from last season.
The EU's sugar output is expected to rise 3% to 15.4 million metric tons in 2023/24 thanks to reduced beet acreage in France versus increased plantings in other member states, the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service (FAS) said.
Speculators increased their bullish bets in futures of raw sugar in the week to Oct 17, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds added 3,168 contracts to their net long position in raw sugar, taking it to 136,496 lots in the period.
In the previous two-weeks, it was observed, Sugar output fears will continue to set the market tone. Drought conditions in the growing region has forced analysts to readjust their previous production estimates and the availability of the sweetener during the busy season. With India preparing to flood the markets, supply strain will be relaxed a bit. However, the escalation of violence in the middle east may be an element to keep a close watch. Israel-Hamas hostility will added pressure on financial markets, which could mean more volatility in the near term.
For Monday, support for the March Sugar contract is at 26.68 cents and 26.52 cents, with resistance at 27.13 cents and 27.42 cents.
(By Commoditiescontrol Bureau: 09820130172)
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