Mumbai, 27 Aug (Commoditiescontrol): ICE raw sugar futures have advanced their weekly gains by ending Friday's session higher, as sugar output prospect remained in the focus.
After the last week's Euro region poor forecast for the sweetener, this week smaller Brazil sugar output prospect reported by a local agri-forecaster. The latest production outlook along with currency movement have helped bend the pendulum in favour of long sugar.
On Friday, ICE raw sugar October closed at 18.47 cents per lb, up 0.57 cents or 3.18%. October London white sugar settled at $559.90 per tone, up $12.00 or 2.19%. Sugar prices rallied sharply to 1-1/2 week highs, gaining momentum from smaller sugar supplies from Brazil and strength in the Brazilian real.
The Brazilian real rallied to a 2-week high against the dollar, which discourages export selling from Brazil's sugar producers and is bullish for sugar prices.
The commodity benefited from the uncertainty related to production, which apart from Brazil sugar output expectation, is also hinges of crude oil movement. Stronger oil prices prompt Brazilian sugar producer to shift sugar cane for biodiesel purpose and hence possible fall in supply of sugar.
Bullish factor...
On Wednesday, Unica reported that Brazil's Center-South sugar crop output in the 2022/23 marketing year through mid-Aug was down 12.8% on year to 18.625 MMT. Also, Conab last Friday cut its estimate for the 2022/23 Brazil sugar crop to 33.9 MMT from an April forecast of 40.3 MMT, citing lower plantings and falling sugar cane yields.
Sugar prices also have support on concern about a smaller global supply due in part to the heat wave in Europe, the world's third-largest sugar producer.
Maxar Technologies recently said 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.
The above outlook prompted traders and speculators to take fresh position in the sweetener. Clearly, the Commitment of Traders (COT) report reveals the shift in positive in that direction. Speculators sharply reduced their net short position in futures of raw sugar on ICE U.S. in the week to Aug. 16, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.
Funds cut 33,833 contracts to their bearish bet in raw sugar, taking their net short position in the sweetener to 37,676 lots.
Bearish factor...
On the opposite site, strong production prospect from Asian region along with measures to curb inflation are seen as a big risk for prices to sustain up move. In fact, sugar prices have recently been undercut as India said it would allow additional sugar exports. India's government, on August 5, 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.
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 the USDA's FAS on April 22 for Brazil's 2022/23 sugar production to 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.
Well, the price outlook on sugar appears fairly balance for now. While there is tug-of-war going on at fundamental level, a movement in currency spec and related shift in technical tone. Currently, the price pattern a sitting pretty on positive side. The risk-reward too favour longs for now.
For Monday, support for October sugar is at 18.05 cents and 17.63 cents, with resistance at 18.69 cents and 18.91 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)
0 Comments 
Post Comment 
