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Weekly: ICE sugar futures post weekly loss on weak consumer confidence, global demand prospect

11 Jun 2022 2:51 pm
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Mumbai, 11 Jun (Commoditiescontrol): ICE raw sugar futures ended the week on a bearish note due to several factors including subdued US consumer confiden index, annual savings amid soaring inflation levels fanned fears about global recession and demand for commodities.

Further, the weakness of Brazil's real currency and news that sugar production in the key Centre-South region of Brazil was stronger than expected during the second half of May, pulled sugar future lower on Friday.

The higher-than-expected U.S. inflation was seen as a bearish factor across commodities, as the possibility of harsher monetary policy could send investors away from riskier assets.

ICE July raw sugar settled 0.42 cent, or 2.2 percent, lower at 18.87 cents per lb. August white sugar fell $14.40, or 2.5 percent, at $564.30 a tonne.

Brazil's center-south sugarcane crushing totaled 43.69 million tonnes in the second half of May, industry group Unica said on Friday, while sugar output reached 2.31 million tonnes.

Dealers said both cane crushing and sugar production were higher than had been expected. They noted that strong exports and an improving production outlook in India also continued to keep a lid on prices.

The U.S. Department of Agriculture (USDA) slashed its projection of sugar stocks-to-use ratio, a key supply level indicator, to 7.6 percent for the 2022/23 season from 10.1 percent seen in May as estimates for sugar production in the United States fell.

That means the amount of sugar available in the United States at the end of the 2022/23 (Oct-Sept) season would only be enough for 7.6 percent of the total demand in the country projected at 12.59 million short tonnes (ST).

In its monthly supply and demand report, the USDA projected U.S. sugar production at 8.82 million (ST) in 2022/23, down from 9.04 million ST in May.

USDA blamed delays in sugarbeet planting as the main factor behind smaller U.S. sugar output.

U.S. farmers had problems with dry weather that delayed planting. There was also some crop switching as grains prices soared. Beet sugar production is seen falling to 4.8 million ST from 5.15 million ST in the previous crop.

With that low level of supplies, which had already increased sugar prices in the country in the previous season, analysts believe the government will likely boost imports in coming months.


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.

Meanwhile, the Indian Sugar Mills Association (ISMA) has said mills should be allowed to export an additional 1 million tonne of the sweetener in the current marketing season from October 2021 to September 2022. Shipments are the only viable option left for raw sugar produced this season, they said.


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.

For Sugar Oct'22 futures support is seen at 18.88 cents while resistance placed at 19.41 cents.

(By Commoditiescontrol Bureau: +91-22-40015505)


       
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