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Raw Sugar Surges on Brazilian Crop Concern; Speculator Cut Short Position

21 Sep 2024 9:35 am
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Mumbai, 21 Sep (Commoditiescontrol): Raw sugar futures soared by more than 3% on Friday, marking a 19.2% increase for the week—the largest weekly price jump since 2008, on supply worries, which prompted short-covering from the speculators. In fact, speculators have reduced their bearish bets in futures of raw sugar on ICE U.S. by 18,428 lots reducing it to just 4,250 contracts in the week to Sept. 17

The October raw sugar contract rose by 0.73 cents, or 3.3%, closing at 22.66 cents per pound, after hitting a nearly seven-month high of 23.13 cents. In London, December white sugar futures climbed $16.30, or 2.9%, to settle at $584.90 per ton.

The rally was driven by mounting concerns over Brazil’s sugar output, the world's largest producer, following a prolonged dry spell. Brazil's center-south region has seen sugarcane yields fall by 7.4% through August compared to the previous season, according to cane research firm CTC. Additionally, wildfires have ravaged around 80,000 hectares of sugarcane, potentially reducing up to 5 million metric tons of cane. As of late August, Brazil’s sugar production had already declined by 6%, with mills producing 3.26 million metric tons. Some mills have shifted focus to ethanol production, further tightening sugar supplies.

European sugar markets also saw mixed signals. While France’s Cristal Union anticipates stable sugar beet yields, Germany's Suedzucker revised its earnings forecast downward, highlighting ongoing difficulties. Meanwhile, India’s favorable monsoon rains could boost sugar production, potentially pressuring global prices. However, a possible export ban from India and Brazil’s struggles may keep prices high.

Analysts at Citi remain optimistic about sugar prices, citing that the risks tied to Brazil’s dry weather may not be fully priced in yet. Wilmar recently reduced its forecast for Brazil's sugar production to a range of 38.8 million to 40.8 million metric tons, down from its previous estimate of 42 million tons.

As the October contract nears its September 30 expiration, traders are watching key technical levels, with support at 22.25/21.77 cents and resistance at 23.07/23.41 cents per pound. The market is expected to remain volatile, driven by weather and geopolitical developments.

(By Commoditiescontrol Bureau: 09820130172)


       
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