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ICE Sugar Prices Reach Three-Week Highs on Global Weather Concerns

7 Jun 2024 8:39 am
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Mumbai, 7 Jun (Commoditiescontrol): ICE sugar prices extended their rally to new three-week highs on Thursday, driven by increasingly volatile weather conditions in major sugar-producing countries such as Brazil, India, and Vietnam. The July raw sugar contract rose by 0.09 cents, or 0.47%, closing at 19.26 cents per pound after reaching a three-week high of 19.33 cents per pound. Last week, the contract had recorded a 0.6% decline. In London, the August ICE white sugar contract increased by $0.50, or 0.1%, settling at $560.80 per metric ton.

Dealers highlighted concerns about potential dry weather in Brazil, which could affect the latter part of the current crop season and even the 2025 season, prompting some funds to unwind short positions. India's monsoon rains have advanced into Maharashtra but could weaken, leading to lower-than-normal rainfall next week, according to weather officials.

Analysts and dealers are particularly worried about crop conditions in Brazil and Thailand. BMI forecasts a 1.5% increase in global sugar production to 185.7 million tons for the 2024/25 season, with consumption expected to grow by 0.5% to 179.7 million tons.

Despite these gains, sugar futures faced pressure from the Brazilian real, which fell to a 14-month low against the dollar, encouraging export sales by Brazilian sugar producers. Slower-than-expected production in Centre-South Brazil during early May helped prices recover from an 18-month low of 17.95 cents in mid-May. Continued dry weather in Brazil until mid-June has 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 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.

Over the past nine weeks, sugar prices declined due to improved 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. Despite Brazil's current sugar output surpassing 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, including recoveries in Thailand and increased output in China, are influencing the market, with Datagro forecasting a modest global surplus of 1.62 million metric tons for 2024/25. 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 19.09 and 18.96 cents, and resistance at 19.34 and 19.46 cents. With 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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