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ICE sugar futures fall near 4-month low on Brazilian export prospect

28 Jun 2022 8:22 am
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Mumbai, 28 Jun (Commoditiescontrol): ICE raw sugar futures extended their decline on Monday weighed down by concerns of Brazil's sugar producers will ramp up export selling after the Brazilian real last Friday fell to a 4-1/2 month low against the dollar. The weaker real encourages export selling by Brazil's sugar producers.

ICE July sugar closed down 0.07 (-0.38%) to 18.26 cents per lb, and Aug London white sugar closed down 2.00 (-0.37%) at $541.60 per tonne. Sugar prices extended their week-long decline, with ICE sugar falling to a 3-3/4 month low and London sugar sliding to a 6-week low.

Dealers said sugar prices, which were rising earlier in the session, dropped amid news that Brazil's Sao Paulo state, the country's largest fuel market, cut state taxes on gasoline but kept them unchanged for hydrous ethanol.

As both gasoline and hydrous ethanol compete for drivers' preference at pumps, the reduction in the so-called ICMS tax on gasoline will likely cut ethanol's appeal to car owners, ultimately leading mills to make less ethanol and more sugar.

Sugar prices recovered from their worst levels Monday on strength in crude oil prices. Crude oil prices rallied +2% Monday, which benefits ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

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.

July sugar futures would find support at 18.11 cents and resistance at 18.44 cents.

(By Commoditiescontrol Bureau: +91-22-40015505)

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