Mumbai, 2 Jul (Commoditiescontrol): ICE sugar futures continued to post weekly losses yet again, falling to the lowest price in four months on Friday, as the market was hit by political moves in producing countries and renewed fears of recession. Further, the strength in dollar against Brazilian real seen boosting sugar exports.
ICE October raw sugar settled down 0.43 cents, or 2.3%, at 18.07 cents per lb, the lowest price since March 1. August London white sugar fell $7.20, or 1.3%, to $549.40 a tonne.
Sugar prices were under pressure from weakness in the Brazilian real, which fell to a 4-3/4 month low against the dollar. The weaker real encourages export selling by Brazil's sugar producers.
Dealers noted fund selling across softs after negative news on U.S. and European manufacturing activity stoked recession fears. They also cited falling ethanol values in Brazil after changes in fuel taxes this week that are bringing down prices. As ethanol prices fall, Brazilian mills will be tempted to make less of the biofuel and more sugar.
Deliveries at the July expiry reached about 503,000 tonnes, according to ICE. All of that relatively small amount was Brazilian sugar to be loaded at Paranagua port.
Bearish Factors
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% on year, and said sugar exports would jump to a record 9 MMT. India is the world's second-largest sugar producer.
The Indian Sugar Mills Association (ISMA) recently reported that India's 2021/22 sugar production from Oct 1-May 15 rose 14.4% on year to 34.88 MMT. Meanwhile, Thailand's Office of the Cane & Sugar Board estimated that Thailand would export 7 MMT of sugar this (2021/22) marketing year. Thailand is the world's second-largest sugar exporter.
A bearish factor for sugar was the projection from Conab on April 27 for Brazil 2022/23 sugar production to increase by 15% on year to 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% on year to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by 3.7% on year to 26.6 MMT.
Bullish Factors
A supportive factor for sugar is reduced sugar production in Brazil. Unica on Tuesday reported that Brazil 2022/23 Center-South sugar production through Jun 15 fell 23.6% on year to 7.193 MMT.
Meanwhile, global sugar production in 2022/23 (Oct/Sep) is expected to climb 2% on year to 174.400 MMT from 174.000 MMT in 2021/22 (ISO). The world sugar surplus in 2022/23 is also likely to expand to 2.8 MMT from a surplus of 237,000 MT in 2021/22 (ISO).
Sugar production by Brazil, the world's largest sugar producer, in 2020/21 (Apr/Mar) will climb by 32% on year to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4% of cane juice to produce sugar (up from 34.9% in 2019/20) (Conab).
Sugar production from India, the world's second-largest sugar producer, will climb 13% on year to 31 MMT in 2020/21 due to a good monsoon season (India Sugar Mills Association).
Weather concerns in Brazil are a major bullish factor for sugar prices, with Brazil having experienced its worst drought in 100 years, and as several bouts of frost in Brazil have damaged some sugar cane crops.
Sugar futures would find support at 17.91 cents and resistance at 18.39 cents.
On the basis of above factors, sugar prices are expected to maintain softer tone in the immdediate term given the strong production prospect, ample availability from Brazili, and global recessionary fears dampening demand for oil to sugar.
(By Commoditiescontrol Bureau: +91-22-40015505)
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