Sugar Prices Dip as Crude Oil Weakness Ease Sugar Supply Fears

Mumbai, 7 Sep (Commoditiescontrol): Sugar prices faced moderate declines on Friday, pressured by falling crude oil prices, which could prompt sugar mills to shift more cane toward sugar production instead of ethanol, increasing sugar supplies.

The October raw sugar contract dropped by 0.31 cents, or 1.6%, to settle at 18.91 cents per pound, marking a weekly loss of 2.4%. In London, October white sugar futures fell by $3.80, or 0.71%, to close at $533.00 per ton.

India, the world's largest sugar consumer, is expected to extend its sugar export ban for a second year due to concerns over reduced cane output, according to government sources. Meanwhile, forecasts of rainfall in Brazil have introduced bearish sentiment, as improved weather conditions could boost next year’s crop.

Last week, sugar prices surged to 1.5-month highs due to severe drought and fires in Brazil, particularly in the state of São Paulo, a key sugar-producing region. The sugarcane industry group Orplana reported that around 80,000 hectares of sugarcane fields were affected by 2,000 fire outbreaks. Green Pool Commodity Specialists estimated that up to 5 million metric tons (MMT) of sugarcane might have been lost.

Despite the recent decline, Citi’s Commodities team remains optimistic about sugar prices, predicting they could rise to 20 cents per pound in the coming months. The bank also noted that India's continued absence from the export market will increase the global reliance on Brazil, where any crop setbacks or logistical issues could further tighten supplies and push prices higher.

Production forecasts for Brazil’s Centre-South region have been downgraded due to drought and fire damage, with Datagro lowering its estimate to 39.3 million tons and Czarnikow reducing its projection to 39.2 MMT from 40.0 MMT. Covrig Analytics also raised its global sugar deficit estimate for the 2024/25 season to 600,000 metric tons, doubling its previous forecast.

However, ample rainfall in India and Thailand has eased some market concerns, tempering the recent bullish sentiment. Speculative traders have reduced their bearish positions on raw sugar futures, with funds cutting 28,805 lots, bringing the net short position to 37,117 contracts as of August 27, according to CFTC data.

Market participants are closely watching key support and resistance levels at 18.63/18.35 cents and 19.40/19.89 cents, respectively, as the market balances these conflicting signals.

(By Commoditiescontrol Bureau: 09820130172)