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Weekly: ICE raw sugar extend rise for 5th straight week; Weak dollar, lower Brazil sugar output help gain

12 Nov 2022 9:49 pm
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Mumbai, 12 NOV (Commoditiescontrol): ICE raw sugar prices extended their gains for the fifth straight week in a row amid signs of smaller sugar production in Brazil and as softer U.S. dollar made sweetener cheaper for buyers in other currencies.

In fact, on Friday ICE raw sugar futures posted moderate gain, climbing to a 5-month nearest-futures high and London sugar posting a 2-month high.

Positive carry-over from Thursday supported sugar prices when Unica reported that Brazil's Center-South sugar output in the 2022/23 marketing year through October was down 3.1% on year to 30.281 MMT. Also, a weak dollar boosted sugar prices after the dollar index Friday tumbled to a 2-3/4 month low.

ICE March raw sugar settled up 0.23 cents, or 1.18%, at 19.64 cents per lb, after matching a 3-1/2-month peak of 19.43 cents from Wednesday. The contract added 4.97% for the week. December London white sugar settled up $8.30, or 1.56%, at $538.70 a tonne. It was little changed over the week.

Bullish factors...

Dealers said funds were adding to long positions in raw sugar against the backdrop of a weaker dollar and a rally in global equity markets.

S&P Global Commodity Insights forecast the South American region would produce just 1.88 million tonnes.

Sugar prices also have support after India last Saturday announced that it would allow 6 MMT of sugar exports in the 2022/23 season. That is well below the 2021/22 quota of 11.2 MMT and below the 8 MT quota that the Indian government previously considered due to a larger-than-expected Indian sugar surplus, according to Bloomberg.

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.

In a bullish factor, recent heavy rain in Brazil has hurt sugar processing and delayed port export operations. As a result of excessive rain, commodity trader Czarnikow last Monday reduced its forecast for Brazilian 2022/23 sugar production by 100,000 MT from its early-October forecast.

Signs of smaller near-term sugar production in Brazil are supportive of prices. Unica reported last Wednesday that Center-South sugar output in the 2022/23 marketing year through mid-October was down 7.3% on year to 28.163 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.

Bearish factor...

Sugar prices may meet resistance as the prospect of increased sugar supply lingers. On Oct 25, the International Sugar Organization (ISO) projected that global 2022/23 sugar production would climb 4.5% on year to a 5-year high of 181.9 MMT. Also, ISO projected that the 2022/23 global sugar market would be in a surplus of 5.6 MMT.

Higher sugar output in India is bearish for prices. On Oct 24, the Indian Sugar Mills Association predicted that India's 2022/23 sugar production (Oct 1-Sep 30) would climb 2% on year to 36.5 MMT as Indian farmers boosted their planted cane acreage by 5.4% on year to 5.6 mln hectares.

In 2021/22, India's sugar production rose 2.9% on year to 35.8 MMT. India is the world's second-largest sugar producer. Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped 57% on year to a record 11 MMT.

In a bearish factor, StoneX on September 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.

Meanwhile, the US Department of Agriculture in its World Agricultural Supply and Demand Estimates (WASDE) report made several changes from October to both last year’s estimates and 2022-23 forecasts, resulting in higher ending stocks in 2021-22 but lower stocks in the current year.

For the year that ended Sept. 30, 2022, the USDA raised beet sugar production by 77,618 tons to 5,155,000 tons and lowered cane sugar out-turn by 58,824 tons (all in Louisiana) to 3,979,000 tons for a net change of about 19,000 tons with total sugar production of 9,135,000 tons.

“US sugar supply and use for 2021-22 is revised to incorporate complete fiscal year estimates in USDA’s Sweetener Market Data (report),” the USDA said.

The USDA estimated Mexico’s 2021-22 imports at 31,000 tonnes, actual weight, down 19,000 tonnes from October, with beginning stocks unchanged at 1,053,000 tonnes and production unchanged at 6,185,000 tonnes. For 2022-23 the USDA left forecast sugar production in Mexico unchanged at 5,900,000 tonnes.

After hitting 20 month low in October, Sugar prices have staged a technical pull-back supported by short-covering and positive fundamentals. The recent gains have pushed sugar towards psychologically important level of 20 cents. Sweetener will need a further push to sustain rise. U.S. inflation data came in handy for softer U.S. dollar. It remains to be seen whether Sugar musters enough support to climb above this level.

For Monday, support for March sugar contract is at 19.44 cents and 19.23 cents with resistance at 19.85 cents and 20.05 cents.

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

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