Mumbai, 11 Dec (Commoditiescontrol): No respite is insight for the sugar as the commodity continues to feel the pressure from growing supplies from producing regions. Hence, we are witnessing a fifth straight week of losses for the natural sweetner leading the prices to fall near five-month low. The scenario remains bleak as the pacy output in Brazil and lingering uncertainty over India's export decision ban fuel more fund liquidation.
Yet, ICE raw sugar prices extended gain on Friday, rebounding from five-month low, largely benefiting from bargain buying, which is partially triggered by India Government's decision to ban sugarcane usage for ethanol as well as traders readjusting their position. However, the markets continued with their negative ending for the week.
Other factors that helped the commodity to close Friday's session higher was dollar weakening against major currencies. However, weaker oil alongside increased output in Brazil checked surge in prices of the natural sweetener.
Last week, Conab raised its 2023/24 Brazil sugar production estimate to 46.9 MMT from an August estimate of 40.9 MMT.
ICE sugar futures for March delivery settled 0.33 cent, or 1.4% higher at 23.36 cents per lb, after dipping to a four-month low of 22.80 cents on Thursday. The contract lost nearly 14% in the last two weeks, posting their fifth straight week of losses. The front month contract hit a 12-year high of 28.14 cents on Nov 7.
March London white sugar rose $8.30, or 1.3%, to $654.40 a ton. It ended the week 6.08% lower. A total of 262,750 metric tons of white sugar has been tendered against the December contract on ICE Futures Europe, exchange data showed on Thursday.
Dealers said India's move to direct sugar mills to focus on sugar output and not to use cane juice or syrup to produce ethanol was not as bearish as one might think, given it will still not allow for exports. The move aims to boost domestic sugar supplies.
Analysts were expecting a sugar diversion for ethanol production in India of around 4-4.5 million metric tons in 2023/24, so if that is not happening supplies of sugar in India will jump.
They expect speculators to be flat or only slightly long currently, after the massive liquidation that seems to run far ahead of fundamentals due to algo trading systems.
Meanwhile, a surge in EU imports of Ukrainian sugar is expected to continue for at least for another season, weighing on prices in the bloc.
The U.S. will import more sugar at higher tariff, the USDA projected on Friday, and the market sees the need for even higher imports.
Sugar prices have been on the decline, retreating from a 12-year high recorded last month, on increased supplies from Brazil. Brazil exported 3.68 million metric tons of sugar in November, 10% up year-on-year.
In recent time, sugar prices lost strength after the International Sugar Organization (ISO) forecast bearish outlook. The global sugar body has raised its 2023/24 global sugar production (Oct-Sep) estimate to 179.9 MMT from a previous estimate of 174.8 MMT and cut its 2023/24 global sugar deficit to -335,000 MT from a prior forecast of -2.1 MMT.
Funds reduced their bullish bets in raw sugar futures significantly during the week to Dec 5, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Speculators cut 42,631 contracts to their net long position in raw sugar, taking it to 79,099 lots in the period.
It must be noted that larger-than-expected sugar production in the key Centre-South region of Brazil had eased supply tightness and contributed to the current bout of long liquidation by investment funds.
Analysts, too, have maintained cautious view due to increased selling of raw sugar during the annual rebalancing of commodity indexes in January. There is transference of longs from specs to trade and/or consumers in recent times, which is actually positive in the long run, analysts added.
There is decline Sugar output fears after UNICA report, which has helped cut global deficit prospect. However, drought conditions in the growing region such as Thailand remains a big challenge, which has incidentally forced analysts to readjust their production estimates and the availability of the sweetener during the busy season. Conversely, ample supplies from Brazil and India, should help ease supply constraint. 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 23.11 cents and 22.85 cents, with resistance at 23.61 cents and 23.85 cents.
(By Commoditiescontrol Bureau: 09820130172)
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