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Sugar Prices Rebound on Short-Covering and Stronger Brazilian Real

24 Jan 2025 9:52 am
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Mumbai, 24 Jan (Commoditiescontrol): Raw sugar futures rose for the second consecutive session on Thursday, driven by short-covering and a strengthening Brazilian real. A firmer real discourages export sales by Brazilian sugar producers, providing support to global sugar prices.

The March raw sugar contract on ICE gained 0.53 cents, or 2.92%, closing at 18.69 cents per pound. This marks a recovery after hitting a five-month low of 17.57 cents earlier in the week. London white sugar also climbed 1.95%, or $9.30, to settle at $486.90 per metric ton, rebounding from a two-year low of $462.60.

Market sentiment was further influenced by commodity funds' excessive short positions in sugar futures, which could fuel a short-covering rally. The latest Commitment of Traders (COT) report revealed that funds increased their net-short positions in New York sugar futures to 106,045, a five-year high, while London sugar futures saw a similar trend with net shorts reaching 121,425.

The recent slump in sugar prices has been attributed to an improved global supply outlook. India, the world’s second-largest sugar producer, announced it would allow the export of 1 million metric tons (MMT) of sugar this season. This move comes after export restrictions were imposed in October 2023 to protect domestic supplies. During the 2022/23 season, India exported 6.1 MMT, significantly lower than the record 11.1 MMT exported the previous year. Analysts at Commerzbank stated that while India’s export quota remains modest, it contributes to stabilizing the global supply situation.

Brazilian sugar production has also performed better than initially expected, and Thailand is projected to increase its sugar output by 18% to 10.35 MMT in the 2024/25 season. Additionally, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to 2.51 MMT, down from the previous estimate of 3.58 MMT. The ISO also raised its 2023/24 global surplus estimate to 1.31 MMT, up from 200,000 metric tons.

Analysts identified key technical support levels for raw sugar at 18.29 and 17.90 cents per pound, with resistance at 18.92 and 19.16 cents. Moving forward, factors such as weather conditions in Brazil, ethanol pricing, and policy changes in major sugar-producing countries will likely shape market trends.

(By Commoditiescontrol Bureau: 09820130172)


       
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