Mumbai, 24 Jun (Commoditiescontrol): ICE raw sugar futures hit six-week lows on Thursday on worries over a weakening real and falling energy prices, with investors still assessing the risk that hefty interest rate rises will tip economies into recession.
ICE July raw sugar settled down 0.07 cent, or 0.4%, at 18.38 cents per lb, having hit its lowest since mid-May at 18.32 cents. August London white sugar fell $2.00, or 0.4%, at $551.00 a tonne.
Sugar price decline is led by crude's 1% decline on Thursday, which undercuts ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
Dealers assessed current situation as very important for price movement while adding that a close below 18.38 cents could prompt automated funds that trade technical signals to target a move as low as 16.50 cents.
This would easily be the case, they said, if the Brazilian real continues to weaken and oil prices slide further on recession fears.
A weak real tempts exporters in top producer Brazil to ship dollar-priced sugar by raising returns in local currency terms, while falling energy prices prompt Brazilian cane mills to produce more sugar and less ethanol, a cane-based biofuel.
Rabobank said in a report that new fuel tax legislation in Brazil, if implemented, would bring the sugar-equivalent price of ethanol down by around 12%, or a little over 2 cents/lb.
The outlook for larger sugar crop sizes in India and Thailand is bearish for sugar prices. On April 15, the ISMA raised India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up 12.2% on year, and said sugar exports would jump to a record 9 MMT. India is the world's second-largest sugar producer.
The Indian Sugar Mills Association (ISMA) recently reported that India's 2021/22 sugar production from Oct 1-May 15 rose 14.4% on year to 34.88 MMT.
Meanwhile, Thailand's Office of the Cane & Sugar Board estimated that Thailand would export 7 MMT of sugar this (2021/22) marketing year. Thailand is the world's second-largest sugar exporter.
A bearish factor for sugar was the projection from Conab on April 27 for Brazil 2022/23 sugar production to increase by 15% on year to 40.3 MMT as the crop recovers from the past season's adverse weather. Also, the USDA's FAS on April 22 projected Brazil's 2022/23 sugar production would climb 2.9% on year to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by 3.7% on year to 26.6 MMT.
In a positive factor for sugar prices, Unica on May 25 reported that Brazil 2022/23 Center-South sugar production through May 15 fell 39.8% on year to 2.737 MMT.
Sugar Oct'22 futures would find support at 18.25 cents and resistance at 18.48 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)