Mumbai, 4 Jun (Commoditiescontrol): ICE sugar futures posted moderate losses on Friday, as ample monsoon rain forecast in India may lead to a bumper sugar crop this year and is bearish for prices.
The India Meteorological Department Thursday predicted a normal monsoon for India this season. India's monsoon season runs from June through September and waters more than half of the country's farmland.
ICE July raw sugar fell 0.06 cent, or 0.3 percent, at 19.29 cents per lb. The prices of sweetner are down 1.63 percent during the truncated week of trading as prospects of increased supplies amid moderation in demand played out negatively.
On Wednesday, London sugar climbed to a 5-1/2 nearest-futures high on strength in crude oil and gasoline prices, as gasoline soared to a new record high. Higher crude prices benefit ethanol prices and may prompt Brazil's sugar mills to divert cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
However, the London market for futures of refined sugar, robusta coffee and cocoa was closed on Thursday and Friday.
Meanwhile, the FAO Sugar Price Index averaged 120.3 points in May, down 1.3 points (1.1 percent) from April, marking the first decline after sharp increases registered in the previous two months. The recent monthly decline in international sugar price quotations was triggered by limited global import demand and good global availability prospects, mostly stemming from a bumper crop in India.
The weakening of the Brazilian Real against the US dollar and lower ethanol prices resulted in further downward pressure on world sugar prices. However, uncertainties over the current season's outturn in Brazil, the world's largest sugar exporter, prevented more substantial price declines.
Bullish Factors
A positive factor for sugar is smaller output from Brazil after Unica reported Wednesday that Brazil 2022/23 Center-South sugar production through May 15 was 2.737 MMT, down 39.8 percent on year.
Rains are expected over Brazil's center-south starting from June 8, possibly halting sugarcane harvesting for a couple of days.
Howecer, traders said the market now looked fragile due mainly to good outright supply and as traders await for a possible gasoline tax cut in Brazil, which would pressure ethanol prices and possibly result in higher sugar production.
Bearish Factors
Industry experts are already forecasting bumper sugarcane crop, which means higher crushing into sugar making. A ramped-up sugar output in India is bearish for prices after the Indian Sugar Mills Association (ISMA) reported that India's 2021/22 sugar production during Oct 1-May 15 rose 14.4 percent on year to 34.88 MMT.
Trade and government sources in India believe the country will export 1.5 million tonnes more until October when the new season starts, taking total exports in the current season to 10 million tonnes.
The outlook for larger sugar crop sizes in India and Thailand is bearish for sugar prices. On April 15, the ISMA raised India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up 12.2 percent on year, and said sugar exports would jump to a record 9 MMT. India is the world's second-largest sugar producer.
Meanwhile, the Thailand Office of the Cane & Sugar Board reported on March 22 that Thailand's 2021/22 sugar production from Dec 7-Mar 19 was at 9.6 MMT, and the total Thailand 2021/222 sugar harvest Dec 7-Mar 31 may reach 10 MMT, a 3-year high. As a result, the Thailand Office of the Cane & Sugar Board expects Thailand to export 7 MMT of sugar this (2021/22) marketing year. Thailand is the world's second-largest sugar exporter.
The outlook for bigger global sugar supplies is negative for prices. Green Pool Commodity Specialists on April 29 shifted its projection for the 2022/23 global sugar market to be in surplus by 1.41 MMT versus a January forecast of a 742,000 MT deficit.
The projection from Conab on April 27 for Brazil 2022/23 sugar production to increase by 15 percent on yearto 40.3 MMT as the crop recovers from the past season's adverse weather. Also, the USDA's FAS on April 22 projected Brazil's 2022/23 sugar production would climb 2.9 percent on year to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by 3.7 percent on year to 26.6 MMT.
Dealers cited the OPEC decision to bring forward oil production rises to offset Russian output losses, a bearish factor for the sugar market.
Speculators reduced their net long position in futures of raw sugar, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Money managers and hedge funds reduced their net long position in raw sugar by 6,258 contracts to 82,489 lots.
For sugar Jul'22 contract a support is placed at 19.22 cents and resistance at 19.39 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)
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