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Weekly: ICE Sugar futures gain for 2nd straight week amid tight global supplies

11 Mar 2023 7:15 pm
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Mumbai, 11 MAR (Commoditiescontrol): ICE raw sugar futures continue to derive support from favourable fundamental factors, particularly the growing concern of the sweetners near-term availability. The markets have entered consolidation phase after its recent strong advance amid tighter global supplies, dealers said.

Prices of the sweetener strengthened in recent times on India's sugar output prospect and concerns about port congestion in top exporter Brazil suggests tighter availability of the sweetener.

On Friday, May ICE raw sugar was little changed at 21.16 cents per lb. The asset hit a contract high of 21.33 cents in the prior session while it added 1.14% for the week. May London white sugar settled $2.40, or 0.4%, at $589.90 a tonne. It ended the week quarter percent higher.

Dealers said the recent run-up has been driven partly by diminishing prospects for production in India, Thailand and China, which have helped to tighten global supplies.

Bullish factors....

Sugar gathered attention eversince news of India struggling to meet output estimated hit the market. Adding fuel to fire was concerns about port congestion in top exporter Brazil, which is expected to harvest large crops of grains and sugar and is experiencing excessive rains at ports.

In India, some mills have already stopped crushing cane in the state of Maharashtra, the country's biggest producer. 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.

Recently, India's Food Minister Tomar Singh said the country could allow another 1 MMT of sugar exports if India's 2022/23 sugar output reaches the government target of 33.6 MMT. India has already allowed 6 MMT of sugar exports.

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

A diminishing outlook for production in India has helped to 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.

Meanwhile, some mills were closing in Thailand slightly earlier than normal and production was likely to be lower than had been expected.

Sugar output in China's top growing region is set to be the lowest in six years, said Australia-based Green Pool Commodities on Thursday, as it revised down its estimate for production in one of the world's top producers.

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

Factors such as above are pointing to market structure of tight supplies in the near-term.

Bearish factors....

An improving outlook for sugar production in Centre-South Brazil during upcoming 2023/24 has, however, helped to stall the advance. Also, the sugar production forecast in Centre-South Brazil remains upbeat. The region's suguar output is likely 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.

Conclusion: Looking at the bullish-bearish factor, it is quite obvious that the bulls have upper hand in the current trade set-up. Remember, the dealers have been suggesting of 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. Broader markets are positioning against bigger U.S, rate hike possibility, the probability for risky-assets slipping into negative zone will weigh on investor sentiment. Therefore, staying light on long position can be a best strategy going forward.

For Monday, support for the May Sugar contract is at 20.81 cents and 20.45 cents, with resistance at 21.37 cents and 21.57 cents.

(By Commoditiescontrol Bureau: 09820130172)

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