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Weekly: ICE raw sugar futures post 2nd straight weekly gain; Scale near 7-month peak on supply shortage, fund buying

19 Nov 2022 8:12 pm
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Mumbai, 19 NOV (Commoditiescontrol): ICE raw sugar futures have clocked their second straight weekly gain that saw the sweetener scaling near seven-month peak, helped by combination of factors including defaulting of export contracts by Indian suppliers, recovery in Brazilian real currency and chart based buying activity by speculators.

Dealers said the development in India might have led to some traders covering short positions in the futures, giving a boost to prices. Also, Brazil's incoming government seeking to assuage fears about fiscal spending helped real - its currency to recover. These moves forced speculators to raise bullish bet. The deliveries at the December expiry were seen at 7,190 lots, or 359,500 tonnes.

On Friday, ICE March raw sugar settled up 0.32 cents, or 1.6%, at 20.05 cents per lb, after hitting 20.32 earlier, the highest price since mid April. The contract added 3.46% for the week.

March London white sugar rose $9.90, or 1.9%, at $543.30 a tonne.

Bullish factors...

Sugar prices rallied during the week on continued concern about Asian sugar supplies after recent news that some Indian sugar mills reneged on contracts, forcing buyers to cover positions in the cash market.

In addition, the Indian Sugar Mills Association this week said that India's sugar production from Oct 1 to Nov 15 fell by 4.3% on year, suggesting disruptions in production.

The sweetener also mustered support from reports that rain in Thailand has delayed the harvest by up to two weeks.

Sugar was able to shake off bearish factors, including general worries about global commodity demand and the 8% overall plunge in Dec WTI crude oil prices seen on Thursday and Friday.

Lower 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.

Sugar prices have carry-over support from last Thursday 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.

Elsewhere, speculators have increased their bullish bets in raw sugar, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds net long position in raw sugar rose to 86,659 lots after a large addition of 74,134 in the period.

Bearish factors...

Although, Indian exporters threatening to pull out of export contracts might have raised fears about availability of sugar. But that's a short-term phenomena. The country is set to harvest record cane this season that would result in strong crushing activity.

Higher sugar output in India is bearish for prices. On Oct 24, the Indian Sugar Mills Association issued a forecast suggesting 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.

Further, the International Sugar Organization (ISO) Tuesday projected that global 2022/23 sugar production would climb 5.5% on year to a record high of 182.1 MMT. Also, ISO projected that the 2022/23 global sugar market would be in a surplus of 6.2 MMT.

Meanwhile, the market remains in a technically overbought so a mild correction was on the cards. After hitting 20 month low in October, which triggered a technical pull-back. Basically, short-covering witnessed on the counter ahead of December contract expiry. As such, sugar prices were pushed towards psychologically important level of 20 cents. Once surpassing 20 cents level, the commodity is expected to pass through consolidation phase before attempting to move higher. Sweetener will need a strong support to sustain rise.

For Monday, support for March sugar contract is at 19.65 cents and 19.24 cents with resistance at 20.40 cents and 20.74 cents.

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

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