Mumbai, 15 OCT (Commoditiescontrol): ICE sugar futures have maintained their weekly winning streak for the third straight week in a row, largely aided by weather concerns in the producing region, especially in South America and Europe. Extreme weather conditions in these regions are fanning output concerns, even as risk from volatile currency cue continue to threaten demand outlook.
On Friday, ICE raw sugar futures settled higher supported by rain-led delay in Brazil's sugar harvest raise availability concern. ICE March raw sugar was up 0.16% at 18.84 cents per lb. December London white sugar was up 0.38% at $559.30 a tonne.
ICE raw futures ended the week 0.86% higher while London white sugar advance 1.18% for the week.
However, Sugar prices fell back from their best levels Friday after crude prices dropped more than 3% to a 1-1/2 week low. Weaker crude prices undercut ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
On Wednesday, ICE raw sugar surged a 2-1/2 month high, and London sugar rallied near 1-month high on signs of smaller global production.
Bullish factors...
Dealers said rains in Brazil, the top sugar producer, had slowed this year's harvest and were threatening to curtail production.
In fact, Czarnikow on Friday downgraded its forecast for sugar output in Brazil this year by 700,000 tonnes, citing an increased risk that not all the sugarcane will be crushed due to adverse weather conditions.
Rural Clima said Brazil's Center-South region, which produces most of Brazil's sugar, is expected to see widespread and regular rain for the rest of this month.
Unica reported Tuesday that Center-South sugar output in the 2022/23 marketing year through September was down 9.9% on year to 26.334 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.
This past summer's hot and dry weather in Europe, the world's third-largest sugar producer, caused smaller sugar beet yields and lower sugar production, which is bullish for sugar prices. Czarnikow Group predicts sugar output in the European Union (EU) and the UK should total 16.4 MMT this year, about 1 MMT lower than last year, which means the EU may have to import more sugar than usual.
Europe's largest sugar producer Suedzucker posted a rise of almost 80% in quarterly earnings and again forecast higher full-year profits.
Speculators switched to a long position on futures of raw sugar on ICE U.S. in the week to Oct. 11, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds added 39,545 lots on raw sugar to a net long of 13,022 contracts, the CFTC said.
Bearish factors...
In a bearish factor, StoneX on Sep 18 projected that Brazil Center-South 2023/24 sugar production would climb 5.7% on year to 35.2 MMT. StoneX also projects that global 2023/24 sugar production would climb 3% on year to 194.4 MMT on rising supplies from Brazil, India, and Thailand. StoneX predicts a 2022/23 global sugar surplus of 3.9 MMT.
Robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped 57% on year to a record 11 MMT. The Indian Sugar Mills Association (ISMA) estimates that India's 2021/22 sugar production (Oct 1-Sep 30) rose 2.9% on year to 35.9 MMT.
The U.S. Department of Agriculture has raised its outlook for sugar supplies in the United States for the 2022/23 season.
For Monday, support for March sugar contract is at 18.76 cents and 18.68 cents with resistance at 18.91 cents and 18.98 cents.
During the just concluded week, most commodity prices witnessed volatility led by currency moves, as lofty levels of consumer inflation in the US continue to support Federal Reserve's hawkish stance. Markets are already discounting 75 basis hike in interest rate during the next FOMC meet.
Against the backdrop of rising rate prospect, commodities markets are likely to feel pressure from increase in price and may lead to slower demand. As it is global recessionary pressures are fueling risk-off trades and hence, prices of commodities may also start retracing lower. But, for sugar, future trend remains optimistic in wake of weather uncertainty led output concerns. The sweetener can muster support from tight availability condition. Supply from Brazil to India will be curtailed by rain-led delay for former and disparity in export price for later.
Not to forget that the speculators have switched their stans from short to long.
(By Commoditiescontrol Bureau: +91-22-40015505)