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Weekly: ICE raw sugar futures settle the week on flat note; India's export plan in focus

22 Jan 2023 9:57 pm
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Mumbai, 22 JAN (Commoditiescontrol): Sugar prices moved between positive and negative zone before settling the week to Jan 20th on a flat note amid reduction in supply fears and in-line with the broader commodity market moves.

ICE raw sugar futures ended Friday's session moderately higher, thanks to late rebound in the sweetener due to India's indecisiveness over sugar exports while weather remains mostly positive for production in top grower Brazil.

On Friday, the ICE March raw sugar settled up 0.04 cents, or 0.2%, at 19.72 cents per lb. March London white sugar was little changed at $546.40 a tonne.

Market is trying to consolidate around 19.70 cents with little producer or end-user interest at current levels, traders said. The market did not react on Thursday to news that India is not looking at allowing more sugar exports this season. Traders were expecting the world's biggest sugar producer would permit a second tranche of overseas shipments. Such reports appearing in media dampened sentiments.

India, the world's second largest sugar exporter, has contracted to ship about 5.6 million tonnes of sugar since the government said late last year that mills could export up to 6.1 million tonnes by May.

China, one of the world's biggest sugar buyers, imported 6.9% less sugar last December versus a year ago, data showed.

As regards weather forecast, positive development was in-store for Brazil's new crop. Brazil's Finance Ministry announced a plan late 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.

Bullish factors....

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.

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.

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 forecast EU 2022/23 sugar output would fall 7% on year to 15.5 MMT.

Bearish factors....

Good prospects for production in major countries such as Brazil, India and Thailand help to put a lid on prices. India is likely to produce 34.3 million tonnes of sugar in 2022/23, down 4% from the previous forecast, after sugar cane yields in producing states were hit by adverse weather, a senior industry official told Reuters on Tuesday.

Meanwhile, 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.

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 19.54 cents and 19.36 cents with resistance at 19.86 cents and 20.00 cents.

(By Commoditiescontrol Bureau: 09820130172)

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