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Weekly: ICE Sugar futures posts weekly gain on supply worries

5 Mar 2023 4:40 pm
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Mumbai, 5 MAR (Commoditiescontrol): ICE raw sugar futures clocked weekly gains as traders rushed to buy the sweetener following the bullish fundamental. The spot contract ended higher on Friday, benefiting from the sluggish production outlook from India this season.

May ICE raw sugar settled 0.61 cents, or 3%, higher at 20.92 cents per lb. The contract added 6.35% for the week. May London white sugar closed $15.60, or 2.7%, strong at $588.40 a tonne, climbing to a fresh contract one-month high. It added 4.7% during the last five trading sessions.

Dealers said the market continued to focus on the outlook for production in India, with prices having the potential to rise if the outlook diminishes further after adverse weather in the top producing state of Maharashtra.

More than two dozen mills in Maharashtra had stopped cane crushing by the end of February, nearly two months earlier than last year, a senior state government official said.

Meanwhile, India government too fixed a local quota at 22 lakh metric tonnes for March. The move aimed at checking domestic price growth.

A diminishing outlook for production in India has helped boost prices, as well as comments about smaller production in Mexico.

India is likely to produce 33.5 million tonnes of sugar in the season to Sept. 30 this year, down 2.9% from the previous forecast of 34.5 million tonnes, a leading trade body said.

Bullish factors....

The market structure points to tight near-term supplies. The market continued to derive support from short-term supply tightness. Signs of tight global sugar supplies are bullish for prices. As much as 11, 551 contracts, or about 587,000 MT of sugar, were delivered to settle the March 2023 ICE sugar contract that expired on Tuesday. That was well below the 1.34 MMT needed to settle the March 2022 ICE sugar contract and the smallest for the month of March since 2013 and a sign of tight supplies.

Sugar production in Centre-South Brazil forecast to rise by 13% to 38 million tonnes in the 2023/24 season, DATAGRO director Guilherme Nastari told the Dubai Sugar Conference.

Brazilian energy producer Raizen SA expects 48% of the cane crop in the Centre-South region to be used to produce sugar in the upcoming 2023/24 season. The forecast was slightly above a median forecast of 46% in a Reuters poll issued earlier this month.

Elsewhere, the French sugar beet crop area set to fall to a 14-year low this year despite high prices, with farmers deterred by potential crop damage because of pesticide restrictions.

Reduced sugar production in Europe is a supportive factor for sugar prices. The European Association of Sugar Manufacturers on Dec 8 pegged EU 2022/23 sugar output to drop by 7% on year to 15.5 MMT.

Bearish factors....

Strong Brazil sugar output is bearish for prices after Unica reported Monday that Brazil's 2022/23 sugar production through mid-February rose 4.5% on year to 33.503 MMT. Brazil is the world's largest sugar producer.

Meanwhile, the Feb 1 projection from the Thai Sugar Mills Corp suggested that Thailand's 2022/23 sugar production would climb 14% on year to 11.55 MMT. Likewise, Thailand's 2022/23 sugar exports projected to increase 17% on year to 9.05 MMT. According to the Green Pool Commodity Specialists, Thailand's 2023 sugar production reached 6.59 MMT as of Feb 8, up nearly 10% from last season, with sugar content in the cane crop at a record high. Thailand is the world's second-largest sugar exporter.

Dubai's Al Khaleej Sugar is operating at 40% capacity because of "dumping" by India, the company's Managing Director Jamal al-Ghurair said.

The near term prospect for sugar remains highly favourable as Indian supplies continue to be in focus. A surge in Brazilian sugar cane crushing toward sweetener would help balance the prospect. Till such time, sugar prices will witness some firmness.

For Monday, support for the May Sugar contract is at 20.48 cents and 20.04 cents, with resistance at 21.20 cents and 21.48 cents.

(By Commoditiescontrol Bureau: 09820130172)

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