Mumbai, 6 Aug (Commoditiescontrol): Similar to other agriculture commodities, sugar price movement was largely determined by the weather conditions as well as underlying fundamentals. Both these factors tried their best by applying pull and push force, but sugar managed to eek out small gains for the week as trader seized buying opportunity through bargain hunting.
ICE raw sugar futures rose on Friday as the market climbed further away from a one-year low set earlier this week. ICE October raw sugar settled up 0.39 cent, or 2.2%, at 17.94 cents per lb. October London white sugar rose $22.90, or 4.3%, at $550.90 a tonne. London sugar climbed to a 2-1/2 week high.
ICE raw sugar added 2.28% for the week, while London white sugar added 4.5%. Dealers said the recent bout of fund selling had largely abated, allowing sugar to begin to recover after its slide to a one-year low of 17.20 cents earlier this week.
Bullish factors...
Sugar prices are currently supported by lack of rains in several growing regions. Maxar Technologies said Wednesday that hot and dry conditions in France and Germany threaten to lower sugar beet yields in the European Union and that India's sugarcane around the Ganges River Basin received below-normal rainfall in June and July.
Sweetener's price was also supported by India's cabinet approving an increase in the floor price that sugar mills must pay for cane in the season beginning Oct. 1 to Rs 305 ($3.85) per 100 kg, from Rs 290 a year earlier, the government said in a statement on Wednesday.
The government on Wednesday also raised base recovery rate for the floor price to 10.25% from 10% earlier.
The Indian Sugar Mills Association (ISMA) in a letter to the government on Wednesday called for an increase in the minimum selling price (MSP) to compensate for the higher cane prices, which has raised production costs for sugar mills.
Sugar prices have recently been undercut as India said it would allow additional sugar exports. India's government Friday confirmed that it would allow a further 1.2 MMT of sugar exports for the year ending September 30 to help India's sugar mills from defaulting on export contracts. That would be on top of the current quota of 10 MMT for a total of 11.2 MMT of sugar exports.
Traders said most of the new volume India approved for exports is raws, so the news was supporting white sugar futures.
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.
Speculators increased their net short positions in futures of raw sugar on ICE U.S. in the week to Aug. 2, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Money managers and hedge funds added 23,837 contracts to their bearish bet in raw sugar, boosting their net short position in the sweetener to 67,388 lots.
Sugar Oct'22 futures are likely to find support at 17.69 cents and resistance at 18.09 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)
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