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ICE raw sugar follow crude oil higher; Rains stop cane harvesting in Brazil

23 Sep 2022 8:11 am
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Mumbai, 23 Sep (Commoditiescontrol): ICE raw sugar futures closed moderately higher on Thursday, supported by the rise in crude oil while widespread rains over the Brazilian sugar belt led many mills to stop harvest operations.

ICE October raw sugar settled up 0.27 cent, or 1.5%, at 18.49 cents per lb, having hit a seven-week low of 17.50 cents on Monday. December London white sugar rose $15.30, or 2.9%, to $536.90 a tonne.

Dealers said widespread rains all over Brazil's center-south region have led most mills to stop harvesting for now. "This will slow the crush and impact the ATR (sugar content in the cane)," said a broker.

The rains, despite impacting near-term production, might help extend the crop and also improve the outlook for next year, which reinforced the inverted market situation where deferred contracts are trading at a discount to the spot position.

Meanwhile, high crude prices benefit ethanol and may prompt Brazil's sugar mills to divert more sugarcane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

A bearish factor for sugar was Monday's projection from StoneX for Brazil Center-South 2023/24 sugar production to climb 5.7% on year to 35.2 MMT. StoneX also projects that global 2023/24 sugar production would climb 3% on year to 194.4 MMT on rising supplies from Brazil, India, and Thailand. StoneX predicts a 2022/23 global sugar surplus of 3.9 MMT.

Last Tuesday, ICE raw sugar posted a 5-week high after Unica reported that Brazil's Center-South sugar crop output in the 2022/23 marketing year through Aug was down 10.5% on year to 21.77 MMT.

This summer's hot and dry weather in Europe, the world's third-largest sugar producer, caused smaller sugar beet yields and lower sugar production, which is bullish for sugar prices. Czarnikow Group predicts sugar output in the European Union (EU) and the UK should total 16.4 MMT this year, about 1 MMT lower than last year, which means the EU may have to import more sugar than usual.

Another supportive factor for sugar was the action by Conab on August 19 to cut its estimate for the 2022/23 Brazil sugar crop to 33.9 MMT from an April forecast of 40.3 MMT, citing lower plantings and falling sugar cane yields.

In a bearish factor, India's government, on August 5, 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.

A bearish factor for sugar was the projection from the USDA's FAS on April 22 for Brazil's 2022/23 sugar production to 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.

For Friday, support for October raw sugar is at 17.84 cents and 17.69 cents, with resistance at 18.09 cents and 18.19 cents.

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

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