Mumbai, 6 Nov (Commoditiescontrol): Sugar posted second straight week of gains on concerns of tight supplies amid peak-up in demand activity ahead of festive season in South-East Asia and other regions.
ICE raw sugar prices edged up on Friday, extending their recent gains and eyeing 12-year highs, as short-term supply bottlenecks at Brazil undermined the South-American nation's bumper harvest prospect. Dollar's retreat has also aided to the natural sweeteners price recovery.
ICE sugar futures for March delivery ended 0.29 cents or 1.1% higher at 27.77 cents per lb. This week prices are up 1.57%, their second consecutive week of gain. The contract hit a 12-year high of 28.00 cents last week. December London white sugar rose $12.60, or 1.7%, to $757.60 a tonne. The contract ended the week 2.13% stronger.
Dealers had pointed to short-term supply tightness driven by export bottlenecks in Brazil, which alongside a possible pick-up in demand for whites from Egypt and Ethiopia is helping prices to remain at elevated levels.
In other news, India's sugar production is expected to fall while Thailand may impose restriction on sugar exports. The South-East Asian country reversing a 20% increase in domestic sugar prices after the commodity was classified as a controlled good has further exerted pressure. There's likelihood of India curbing sugar exports.
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.
Thailand's deputy commerce minister said the country would categorize sugar as a controlled commodity in an attempt to control inflation and maintain food security, which would require a regulating panel to approve Thailand's sugar exports of a ton or more.
Recovery in crude prices extended support to natural sweetener prices. Higher crude oil prices encourage millers to divert cane crushing for ethanol, thus limiting sugar supplies. Also, Thailand farmers planted more profitable cassava instead of sugarcane.
On Monday, the International Sugar Organization (ISO) released a global sugar production (Oct-Sep 2023/24) forecast showing a fall of 1.2% on year 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. India's sugar output is likely to fall 8% in 2023/24.
Last month, 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.
Sugar prices have rallied sharply this year and posted 12-year nearest-futures highs recently on concern about smaller global sugar production.
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 month, 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 report placed EU's sugar output 3% higher at 15.4 million metric tons in 2023/24 thanks to reduced beet acreage in France versus increased plantings in other member states.
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 31, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds cut 15,579 contracts to their net long position in raw sugar, taking it to 114,980 lots in the period.
As observed in the past few weeks, the Sugar output fears continue to set the market tone. Drought conditions in the growing region has forced analysts to readjust their production estimates and the availability of the sweetener during the busy season. However, with India preparing to flood the markets, there is possibility of supply strain easing a bit. Overall, the bullish price pattern remains unaltered though funds have decided to cut their long position. A clarity on production in necessary before taking a fresh bet.
For Monday, support for the March Sugar contract is at 27.46 cents and 27.14 cents, with resistance at 27.96 cents and 28.14 cents.
(By Commoditiescontrol Bureau: 09820130172)
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