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ICE raw sugar little changed; Higher supply estimate weighs

2 Dec 2022 8:13 am
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Mumbai, 2 DEC (Commoditiescontrol): ICE raw sugar futures Thursday gave up early gains and closed little changed, as ample supply estimated undermined rain delayed cane harvesting and sugar loading operations in Brazil.

ICE March raw sugar settled at 19.62 cents per lb, having hit a low of 19.05 cents on Monday. The contract lost 3.6% last week.

March London white sugar closed marginally lower at $538.40 a tonne.

The market remained underpinned by a prolonged period of rain in Brazil's south and southeastern regions that is expected to hurt cane harvest progress and also impact sugar loading operations in Paranagua, the country's No. 2 port.

Brazil exported 4.07 million tonnes of sugar in November, 53% more than a year ago and the highest monthly volume of the year.

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

Strength in the Brazilian real is bullish for sugar after the real Tuesday climbed to a 2-week high against the dollar. A stronger real discourages export selling from Brazil's sugar producers.

Dealers said that with funds now holding a large long position they are unlikely to try push prices much higher.

The market now could be stuck in a 19.00-20.00 cent range for some time, traders said. Fund buying seemed limited ahead and Brazilian mills would likely have a strong finish to the season as there is still a sizable amount of cane to be processed.

Fitch Solutions raised its average sugar price forecast for 2023 to 19 cents, driven by a less-than-expected Indian sugar export quota

A rebound in crude prices Monday sparked short-covering in raw sugar.

Last Tuesday, Sugar prices garnered after the Thai Sugar Milliers Corp said Thailand might push back the start of this year's sugar cane crushing season to early December from Nov 23 and cut its 2022/23 Thailand sugar cane output estimate to 105 MMT from 110 MMT, citing unfavorable weather conditions.

The sweetener continues to garner support from concern about Asian sugar supplies after recent news that some Indian sugar mills reneged on contracts, forcing buyers to cover positions in the cash market.

In addition, the Indian Sugar Mills Association said last week that India's sugar production from Oct 1 to Nov 15 fell by 4.3% on year, suggesting disruptions in production. Sugar prices last week also saw support from reports that rain in Thailand has delayed the harvest by up to two weeks.

Unica recently reported that Brazil's Center-South sugar output in the 2022/23 marketing year through October was down 3.1% on year at 30.281 MMT.

On Monday, Sugar prices were pressured by Czarnikow's forecast that suggested Brazil's Center-South mills would produce 34.7 million metric tons of sugar in 2023-24 (Apr/Mar), up 7% on year and the highest in three years.

Adding further pressure was a forecast from the Organization of Cane Producers Association in Brazil. It sees Brazil's sugar output in 2022/23 at 36.9 million metric tons due to favorable weather. Production would reach 37.2 million metric tons in 2023/24, it added.

Sugar prices were weighed down by the general worries about global commodity demand and the sell-off in Dec WTI crude oil prices during the last couple of sessions.

Lower crude prices undercut ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.

Meanwhile, higher sugar output in India is bearish for prices. On Oct 24, the Indian Sugar Mills Association forecast India's 2022/23 sugar production (Oct 1-Sep 30) would climb 2% on year to 36.5 MMT as Indian farmers boosted their planted cane acreage by 5.4% on year to 5.6 mln hectares.

In 2021/22, India's sugar production rose 2.9% on year to 35.8 MMT. India is the world's second-largest sugar producer. Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped 57% on year to a record 11 MMT.

In a bearish factor, the International Sugar Organization (ISO) last Tuesday projected that global 2022/23 sugar production would climb 5.5% on year to a record high of 182.1 MMT. Also, ISO projected that the 2022/23 global sugar market would be in a surplus of 6.2 MMT.

On technical basis, Sugar prices found strong chart support at 19 cents after holding above that level in each of the past two sessions.

For Friday, support for March sugar contract is at 19.44 cents and 19.27 cents with resistance at 19.76 cents and 19.91 cents.

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


       
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