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ICE Sugar Prices Surge Amid Global Weather Concerns

6 Jun 2024 8:39 am
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Mumbai, 6 Jun (Commoditiescontrol): ICE sugar prices rose to three-week highs on Wednesday due to weather-related concerns impacting crops in major sugar-producing countries like Brazil and Thailand. This increase reflects a broader trend of heightened risk premiums for sugar amidst increasingly volatile weather globally.

The July raw sugar contract increased by 0.27 cents, or 1.4%, closing at 19.17 cents per pound, rebounding from a 0.6% decline the previous week. In London, the August ICE white sugar contract rose by $4.50, or 0.8%, to settle at $563.30 per metric ton.

Analysts and dealers highlighted concerns about crop conditions in Brazil and Thailand. "The prolonged dry spell in Brazil could negatively impact sugarcane yields," noted LSEG Commodities Research & Forecast. Thailand's situation is mixed, with varying crop conditions across the country. A broker remarked, "Ideas that the sugarcane crop could be as high as 110 million metric tons are a bit wide of the mark for now."

BMI forecasts a 1.5% increase in global sugar production to 185.7 million tons for the 2024/25 season, while consumption is expected to grow by 0.5% to 179.7 million tons.

Despite the gains, sugar futures faced pressure from the Brazilian real, which fell to a 14-month low against the dollar, encouraging export sales by Brazil's sugar producers. The slower-than-expected production pace in Centre-South Brazil during early May helped prices recover from an 18-month low of 17.95 cents in mid-May. Forecasts of continued dry weather in Brazil until mid-June have raised concerns about the latter part of the crop season.

In Australia, workers at the largest sugar producer temporarily halted industrial action after the company announced that participants in work stoppages would be barred from its mills and would not receive pay. Meanwhile, Brazil's sugar shipments have been robust, with vessel numbers up around 40% compared to the same period last year, reflecting strong demand and a solid start to the season.

Over the past nine weeks, sugar prices declined due to enhanced global supply prospects driven by increased Brazilian production. New York and London sugar prices hit significant lows on May 16 amid expectations of ample global supplies. Although Brazil's current sugar output exceeds last year's figures, a weaker second half of the season is anticipated.

The USDA projects record sugar production of 186 million metric tons for the 2024/25 season, with demand peaking at 178.8 million tons. France's white sugar production increased by 5.8% for 2023/24, reaching 4.2 million metric tons. Global production shifts are also influencing the market, with Datagro forecasting a modest global surplus of 1.62 million metric tons for 2024/25 due to recoveries in Thailand and increased output in China. Conversely, India’s sugar production decreased by 1.6% year-over-year as of April 30.

Speculators have increased bearish bets on ICE U.S. raw sugar futures. The CFTC reported that funds reduced their net short position by 1,362 lots to 68,128 in the week ending May 28, prompting an intensified short-covering rally. Traders are closely monitoring developments, with technical support for the July sugar contract at 18.85 and 18.57 cents, and resistance at 19.29 and 19.45 cents. Given the rising production in Brazil and evolving global supply dynamics, sugar prices are expected to remain volatile in the near term.

(By Commoditiescontrol Bureau: 09820130172)


       
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