Mumbai, 11 Sep (Commoditiescontrol): Sugar prices extended their decline on Tuesday, hitting two-week lows as falling crude oil prices added pressure. The October raw sugar contract fell by 0.36 cents, or 1.9%, to settle at 18.47 cents per pound after touching a low of 18.43 cents. In London, October white sugar futures declined by $7.70, or 1.46%, to close at $518.60 per ton.
The drop in crude oil prices, which hit a 16-month low, affected ethanol markets. Weaker ethanol prices could encourage sugar mills, particularly in Brazil, to shift more cane towards sugar production rather than ethanol, boosting sugar supplies and exerting further downward pressure on prices.
Index funds have begun rolling positions out of the October contract, set to expire on September 30, and into March, which added to the price declines. The improving sugar crop outlook in India, following strong monsoon rains, is also contributing to bearish sentiment in the market.
In Brazil, a survey conducted by S&P Global Commodity Insights anticipates sugar production for the second half of August to total 3.26 million tons, a 6% decrease from last year. Maxar Technologies forecasted rainfall in southern Brazil, which could benefit the country's sugarcane crop, further easing supply concerns.
India's above-average monsoon rains are fueling optimism for a bumper sugar crop, with the country receiving 8% more rainfall than the long-term average by early September. This could lead to higher sugar output, adding further pressure to global sugar prices.
Brazil's sugar production has also seen an uptick, with Unica reporting a 5.4% year-on-year increase in Center-South Brazil production for the current marketing year, totaling 23.91 million metric tons through mid-August.
Despite these factors, analysts from Bank of America suggest sugar prices may still find support due to potential lower-than-expected production in Brazil and India’s likely extension of its sugar export ban. This comes after severe drought and fires in Brazil, which affected 80,000 hectares of sugarcane fields and could result in a loss of up to 5 million metric tons of sugarcane.
Looking ahead, Citi's Commodities team remains optimistic, forecasting sugar prices to rise to 20 cents per pound, particularly if Brazil faces further crop challenges. Traders are now closely watching key support and resistance levels between 18.48 and 19.30 cents per pound as the market navigates these competing factors.
(By Commoditiescontrol Bureau: 09820130172)
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