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Weekly: ICE raw sugar post marginal gain for the week; Supply prospects may weigh

3 Dec 2022 4:55 pm
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Mumbai, 3 DEC (Commoditiescontrol): ICE raw sugar futures Friday closed marginally higher for the week ended Dec 3rd, as traders rushed to cover their position in veiw of the rain delayed cane harvesting and sugar loading operations in Brazil. However, as signs of ample supplies emerged from India, undermined the short supply prospect. Next week's trading activity may commence with some trepidation of Russian oil price cap imposition by European countries.

Millers are building up stocks in anticipation of Christmas festival demand. That should ease some pressures on availability concerns that have caused upmove in sweetener price. Apart from fundamental factors, recent slide in prices to near three week low, has also warranted technical pullback.

Meantime, on Friday, ICE March raw sugar edged 0.6% lower to 19.48 cents per lb, but continued to hold above a 2-1/2 week low struck at the start of the week. Yet, the contract ended 0.78% higher for the week. March London white sugar fell 0.9% to $532.90 a tonne. It was up 0.60% for the week.

Oil price movement will play a major role in sustaining sugar prices. Higher crude prices benefit ethanol and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

Strength in the Brazilian real is bullish for sugar after the real Tuesday climbed to a 2-week high against the dollar. A stronger real discourages export selling from Brazil's sugar producers.

Sugar prices have been capped by expectations of a shift to a market surplus amid favourable production prospects in India. The largest sugar cane producer witnessed increase in sugar output.

Brazil, the World's largest sugar exporter shipped 4.07 million tonnes of sugar in November, 53% more than a year ago and the highest monthly volume of the year. However, prices remained underpinned by a prolonged period of rain in Brazil's south and southeastern regions that is expected to hurt cane harvest progress.

The India Sugar Mills Association (ISMA) Friday reported that India's Oct-Nov sugar production rose 1.5% on year to 4.79 MMT. India is the world's second-largest sugar producer.

Also, a more than 1% fall in crude oil prices Friday weighed on sugar prices. 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.

Higher sugar output in India is bearish for prices. On Oct 24, the ISMA has forecast India's 2022/23 sugar production (Oct 1-Sep 30) to climb 2% on year to 36.5 MMT as 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. 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. However, the Indian Sugar Mills Association earlier this month said that India's sugar production from Oct 1 to Nov 15 fell by 4.3% on year.

In a bearish factor, the International Sugar Organization (ISO) last 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.

Reflecting bearish undertone is the weekly CFTC data. Speculators reduced their bullish bets in futures on raw sugar, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds reduced their long position in raw sugar to 115,079 lots after a cut of 6,424 lots.

On technical basis, Sugar prices found strong chart support at 19 cents after holding above that level in each of the past two sessions.

For Monday, support for March sugar contract is at 19.33 cents and 19.17 cents with resistance at 19.66 cents and 19.83 cents.

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

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