Mumbai, 15 JAN (Commoditiescontrol): ICE raw sugar futures posted gains on Friday, as short-term supply tightness emerged as the key factor in ensuring the contract post its first weekly gain of 2023. However, the prices are not far from Monday's 2-month low.
Strength in the Brazilian sugar cane crop was bearish for sugar prices. While the Brazillian real rallying to a 2-1/2 week high against the dollar helped the sweetener to sustain weekly gains. A stronger real discourages export selling from Brazil's sugar producers, which in turn, result in curbing supplies.
On Friday, the ICE March raw sugar settled up 0.14 cents, or 0.7%, at 19.73 cents per lb, after having touched a two-month low of 18.92 cents on Monday.
The front-month contract gained 4% in the week as it continued to derive support from supply tightness which is expected to continue throughout the first quarter. March London white sugar rose $8.00, or 1.5%, at $547.30 a tonne.
Dealers said the market was subdued with some traders squaring positions ahead of the long holiday weekend in the United States. Monday, markets will be shut on account of Martin Luther King day.
A short-term supply tightness remained the key supportive factor, with March's premium to May widening to about 1.40 cents from 1.29 cents at Tuesday's close.
Brazil's Finance Ministry announced a plan late on Thursday to reinstate federal taxes on fuels, but a final decision is up to President Luiz Inacio Lula da Silva. Ethanol could gain market share if taxes are reinstated.
Also, a rally of more than 6% in crude oil prices to a 1-week high was bullish for sugar. Higher crude prices benefit ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
Bullish factor....
In a bullish factor, StoneX Financial said Dec 14 that due to a delay in Thailand's sugar harvest, projections for Thai sugar exports of 1 MMT to 2 MMT this quarter "will not materialize." Also, India's Sugar Mills Association (ISMA) said that it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.
Reduced sugar production in Europe is another supportive factor for prices, as that may force European sugar and food manufacturers to import sugar, leading to tighter global supplies. The European Association of Sugar Manufacturers on Dec 8 predicted that EU 2022/23 sugar output would fall 7% on year to 15.5 MMT.
Brazil's centre-south sugarcane crushing totalled 2.63 million tonnes in the second half of December, industry group Unica said on Wednesday, soaring from the same period last year when processing had virtually ended by this time.
Bearsh factor....
Good prospects for production in major countries such as Brazil, India and Thailand help to put a lid on prices.
Sugar futures initially dropped to a 2-month low on Monday due to improved sugar supply outlook. The India Sugar Mills Association (ISMA) reported last Tuesday that India's 2022/23 sugar production from Oct-Dec rose 3.7% on year to 12.1 MMT. India is the world's second-largest sugar exporter. Also, Conab on Dec 27 hiked its Brazil 2022/23 sugar production estimate to 36.4 MMT from an Aug estimate of 33.9 MMT.
Higher sugar output in India is bearish for prices. On Oct 24, the ISMA 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. 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, the International Sugar Organization (ISO) on Nov 22 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.
Eleswhere, Speculators cut their bullish bets in raw sugar, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. The net long position of Fund's in raw sugar fell to 115,080 lots after a large reduction of 42,911 contracts.
For Monday, support for March sugar contract is at 19.52 cents and 19.32 cents with resistance at 19.87 cents and 20.02 cents.
(By Commoditiescontrol Bureau: 09820130172)
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