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ICE sugar slips from 3-1/2 week high; global supply outlook improves

16 Aug 2022 7:54 am
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Mumbai, 16 Aug (Commoditiescontrol): ICE raw sugar futures on ICE closed down on Monday, reversing course after hitting a 3-1/2 week high earlier in the session, with fund short covering offsetting bearish news in the wider financial markets.

ICE October raw sugar ​​settled down 0.06 cents, or 0.3%, at 18.54 cents per lb, having hit a 3-1/2 week high of 18.70. October London white sugar rose $0.90, or 0.2%, at $561.00 a tonne.

Dealers said that despite the slew of bearish macro economic news, sugar looks likely to remain firm and may well push higher as funds continue to cover and analysts continue to cut forecasts for the EU sugar beet crop.

Weakness in crude prices undercuts ethanol prices and may encourage Brazil's sugar producers to crush more sugarcane for sugar than ethanol, thus boosting sugar supplies.

China's central bank cut lending rates on Monday as data showed the economy unexpectedly slowed in July. Brazil's oil company Petrobras cut gasoline prices by almost 5%, a move that usually pressure sugar prices.

Philippines said the country's doors remain open to additional sugar imports, though volumes are likely to be around 150,000 tonnes rather than a previously proposed 300,000 tonnes.

An excessive short position by funds in NY sugar futures may provide fuel to any short-covering rally. Last Friday's weekly COT data showed funds boosted their short position in NY sugar futures by 169 in the week ending Aug 9 to 65,811 short positions, the most in 2 years.

In a bearish factor, Unica reported Wednesday that Brazil's Center-South sugar output in the second half of July rose 8.4% on year to 3.302 MMT. However, Center-South crop output in the 2022/23 marketing year through the end of July was down 13.0% on year to 15.974 MMT.

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 18.41 cents and meet resistance near 18.68 cents.

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

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