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Weaker Dollar Boosts Sugar Prices; Brazilian Production Surge Limit Gain

25 May 2024 9:26 am
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Mumbai, 25 May (Commoditiescontrol): ICE sugar prices closed higher on Friday, driven by a weaker dollar that triggered short covering in sugar futures. This rise comes after seven consecutive weeks of declining prices due to increased sugar production in Brazil, which had improved the global supply outlook.

On Friday, the July raw sugar contract climbed 0.15 cents, or 0.82%, to finish at 18.41 cents per pound, marking a 1.5% gain for the week. In London, the August ICE white sugar contract rose by $6.20, or 1.15%, to settle at $545.90 per metric ton.

Market stability was largely attributed to the vigorous pace of cane crushing in Brazil's Centre-South region. Traders are anticipating data from industry group UNICA next week that will cover the first half of May. Brazil's robust sugar harvest has significantly influenced the bearish trend, with UNICA reporting that production in Centre-South Brazil reached 1.84 million tons in late April, an 84.25% increase from the previous year, aided by drier weather conditions. However, concerns about ongoing dryness persist.

According to an S&P Global Commodity Insights analysts survey, sugar production in Brazil's key Center-South region is expected to have increased by 6.3% year-over-year to 2.7 million metric tons in the first half of May. Rabobank noted that the recent weakness in sugar prices can be attributed to Brazilian mills producing maximum sugar output for two consecutive seasons.

Concurrently, the United States Department of Agriculture (USDA) forecasts a record sugar production of 186 million metric tons for the 2024/25 season (October-September), with demand projected to hit an all-time high of 178.8 million tons.

Globally, shifts in production are also influencing the market. Datagro predicts a modest global surplus of 1.62 million metric tons for the 2024/25 season, reversing the previous season's deficit due to recovering production in Thailand and increased output in China. In contrast, India's sugar production has decreased by 1.6% year-over-year as of April 30.

Speculators have increased their bearish bets on ICE U.S. raw sugar futures. The Commodity Futures Trading Commission (CFTC) reported that funds expanded their net short position by 11,217 lots to 69,490 in the week ending May 21.

Traders are closely monitoring these developments, with technical support for the July sugar contract seen at 18.13 and 17.86 cents, and resistance at 18.58 and 18.76 cents. Given the rising production in Brazil and changing global supply dynamics, sugar prices are expected to remain volatile.

(By Commoditiescontrol Bureau: 09820130172)

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