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Weekly: Rally in ICE raw sugar cut short this week by India exports prospect; Europe's drought fear steps in to limit fall

3 Sep 2022 1:22 pm
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Mumbai, 3 Sep (Commoditiescontrol): Although, the ICE raw sugar futures closed Friday's session higher, gaining support from this summer's hot and dry weather in Europe, the world's third-largest sugar producer, the sweetener settled the week on a negative note. India's large exports prospocet in early part of the week, has impacted the price and markets sentiment both.

On Friday, ICE October raw sugar ​​settled up 0.16 cent, or 0.9%, at 18.15 cents per lb. October London white sugar, which expires on Sept. 15, rose $14.70, or 2.6%, to $573.80 a tonne after setting a contract high of $578.20 earlier in the session, the highest since mid-July.

For the week, ICE raw fell 2.62% lower, while London white added 2.48%. Clearly, the sugar markets are playing two different tune. Dealers said prices for raws had derived support from the strength of white sugar futures. Not enough, to push ICE raw back into positive as supply pressure loom.


Bullish factors...


Forecaster Maxar Technologies said Thursday that above-normal temperatures are expected across Europe next week, aggravating a prolonged drought that has hurt sugar beet yields.

Apart from prolonged drought in some parts of Europe that has helped to drive up whites prices, short-covering on the October contract ahead of its looming expiry, and re-stocking activities, have boosted refined sugar prices.

Smaller sugar supplies from Brazil are supportive of prices. Last 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, on August 19, 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.

Earlier, Maxar Technologies also noted that India's sugarcane around the Ganges River Basin received below-normal rainfall in June and July.

Speculators, too, reduced their net short position in futures of raw sugar on ICE U.S. in the week to Aug. 30, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds cut 7,474 contracts to their bearish bet in raw sugar, taking their net short position in the sweetener to 22,718 lots.


Bearish factors...


Signs of abundant current supplies are negative for sugar prices. 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.

Overall, the trend remains highly submissive to selling pressure, however, the weather condition in Europe and other regions will hold key. For sugar to move back in the positive zone will be tough task given, the global economic condition, crude oil prices and the dollar movement. A slight shift in any of these factors can cause sharp move in prices.

For Monday, support for October sugar is at 18.01 cents and 17.88 cents, with resistance at 18.30 cents and 18.46 cents.

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


       
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