Mumbai, 30 Oct (Commoditiescontrol): Among agri-commodities, Sugar continues to face challenging environment led by demand/supply factors and the impact of dry weather conditions in growing region. Though, the balance is currently tilted in favour of bearish outlook given the rising supplies from India, but global deficit outlook powered bulls to drive natural sweetener prices higher during the week ended Oct 27th.
ICE raw sugar prices ended from on Friday, near 12-year high hit in the previous session, mustering support from the tighter global supplies. Port congestion in Brazil will likely worsen a sugar supply tightness in the market, Sucden said.
ICE sugar futures for March delivery rose 0.3 cents or 1.1% to 27.34 cents per lb, having hit a 12-year high of 28.00 cents on Wednesday. The contract ended the week 1.8% higher. December London white sugar rose $7.60, or 1%, to $741.80 a tonne. The contract ended the week 2.11% stronger.
Dealers said Brazilian mills in the Centre-South region will extend sugarcane crushing operations beyond the traditional period to cope with a record crop this year and take advantage of high sugar prices.
On Monday, the International Sugar Organization (ISO) released a global sugar production (Oct-Sep 2023/24) forecast showing a fall of 1.2% y/y to 174.8 MMT, while predicting a global sugar deficit of 2.1 MMT. The latest report tip-toed Sep 5th prediction of Alvean, the world's largest sugar trader, estimation of global sugar deficit in 2023/24 at 5.4 MMT, the sixth year of shortages. Alvean attributed sugar shortage to India restricting sugar exports and drought impacting Thailand's sugar output.
However, on Wednesday, Unica reported that Brazil Center-South sugar output in the first half of October rose 22% on year to 2.247 MMT and that sugar output in the 2023/24 crop year through mid-October rose 23.6% on year to 34.862 MMT. Also, 49.44% of the crushed sugarcane was used for sugar production this year, an increase from 45.63% last year. This should help cap sugar price rise.
Meanwhile, 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 recently on concern about smaller global sugar production.
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.
The USDA has again cut 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 week, 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.
Indonesia's white sugar output is seen down 4% this year at around 2.3 million metric tons as dry weather hits harvests.
Funds reduced their bullish bets in raw sugar futures during the week to Oct 24, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds cut 5,938 contracts to their net long position in raw sugar, taking it to 130,559 lots in the period.
We have maintained in past few weeks, the 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 eased a bit. However, latest report on global supply tightness and the escalation of violence in the middle east may support prices higher. 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 27.06 cents and 26.78 cents, with resistance at 27.56 cents and 27.78 cents.
(By Commoditiescontrol Bureau: 09820130172)
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