ICE sugar prices ease; dry weather underpin support

Mumbai, 9 Aug (Commoditiescontrol): ICE white sugar futures closed lower on Monday in a modest setback after a recent strong advance, although the market remained underpinned by concerns that hot, dry weather in the European Union and Britain could curb production.

ICE October white sugar fell $5.80, or 1.1%, at $545.10 a tonne after rising to a peak of $554.90 in early trade – the highest level in nearly three weeks. October raw sugar closed little changed at 17.96 cents per lb.

Dealers said the market's recent rally, which has seen prices rising by nearly 10% in the last two weeks, has finally begun to meet resistance and prices may be set to consolidate in the short-term.

The European Union plus Britain was expected to produce around 16.4 million tonnes of sugar in the upcoming 2022/23 crop, down about 1 million tonnes from the previous year.

Forecast for ample rains in Brazil's center-south should provide much needed moisture for cane development. Sugar prices were supported by Monday's +1.03% rally in the Brazilian real versus the dollar, which discourages export selling by Brazil's sugar producers.

A lack of recent rain in several sugar-growing regions worldwide supports sugar prices. Maxar Technologies said last Wednesday that hot and dry conditions in France and Germany threaten to lower sugar beet yields in the European Union and that India's sugarcane around the Ganges River Basin received below-normal rainfall in June and July.

Sugar prices have recently been undercut as India said it would allow additional sugar exports. India's government last Friday confirmed that it would allow a further 1.2 MMT of sugar exports for the year ending September 30 to help India's sugar mills from defaulting on export contracts. That would be on top of the current quota of 10 MMT for a total of 11.2 MMT of sugar exports.

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.

Smaller Brazil sugar production is bullish for prices after Unica reported July 27 that Brazil 2022/23 Center-South sugar production through mid-July was 12.661 MMT, down 17.4% on year, with the sucrose content per ton of crushed sugar cane down 3.3% on year at 130.45 kg per ton.

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.

ICE October futures would find support at 17.79 cents and meet resistance near 18.14 cents.

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