Mumbai, 28 May (Commoditiescontrol): Sugar prices continue to succumb increased selling pressure witnessed during the last three weeks, particularly after scaling 11-year high. Traders are raising bets on the commodity price falling due to prospect of improved supplies and decline in demand. However, as the tight supply conditions are raising their ugly heads, there is possibility of the commodity making a quick come-back.
On Friday, sugar futures climbed higher, as the markets consolidated from the one-month lows hit in the prior session.
ICE July raw sugar settled up 0.54 cents, or 2.17%, at 25.37 cents per lb, having hit its lowest since late April on Thursday at 24.61 cents. London August white sugar rose $11.50 or 1.65% to $708.50 a tonne.
The commodity garnered support from Thursday's bi-annual report from the USDA that projected a fall in global sugar ending stocks for 2023/24 to a 5-year low. The sweetener was also supported by the retreat in dollar index from a 2-month high.
In Thursday's bi-annual report, the USDA projects global 2023/24 sugar production to climb 6.0% on year to a record 187.881 MMT and that global 2023/24 human sugar consumption will increase 2.3% on year to a record 180.045 MMT. The agency is also forecasting a 15.2%, on year, fall in 2023/24 global sugar ending stocks to 5-year low of 33.455 MMT.
Last month, sugar prices rallied to 11-year highs on the outlook for tighter global supplies. On Apr 26, the Indian Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 32.8 MMT from a Jan estimate of 34 MMT.
In other news, India's Food Secretary said that the country might not allow additional sugar exports this year due to lower-than-expected sugar production. India has allowed only 6 MMT of sugar exports in 2022/23 after permitting 11.2 MMT in 2021/22, down 46% on year.
The ISMA on Jan 31 cut its India 2022/23 sugar export estimate to 6.1 MMT from an Oct forecast of 9 MMT. Also, the ISMA said that it sees India's sugar mills diverting 4.5-5.0 MMT of sugar to ethanol production in 2022/23. India is the world's second-largest sugar producer.
Another supportive factor for sugar was the International Sugar Organization (ISO) reducing its 2022/23 global sugar production and sugar surplus estimates. The ISO cut its 2022/23 global sugar production estimate to 177.4 MMT from a previous estimate of 180.4 MMT and cut its 2022/23 global sugar surplus estimate to 852,000 MT from a previous estimate of 4.15 MMT. Earlier on on May 4, ISO had predicted a global 2023/24 sugar surplus of 2.1 MMT.
Meanwhile, Sugar prices continues to garner support from changing weather patterns. Apparently, global sugar production is expected to fall. On May 11, the U.S. Climate Prediction Center raised the likelihood of an El Nino weather pattern emerging between August and October to 94% from the 74% forecast last month. If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting sugar crop production. The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.
As far as Brazil is concern, the country's ramped-up sugar production is bearish for prices after Unica reported Brazil's 2023/24 sugar production through mid-May was up 48% on year at 4.063 MMT and that the percentage of sugarcane crushed for sugar rose to 45.6% from 38.5% last year. Sugar output in Brazil's center-south hit 2.53 million tonnes in the first half of May, up 50% versus the same period a year ago, data from industry group UNICA showed. Weakness in the Brazilian real was also bearish for sugar prices as the real Thursday fell to a 2-week low against the dollar. The weaker real encourages export selling from Brazil's sugar producers.
Larger sugar production in Brazil is expected after Conab's Apr 26 forecast. Brazil's 2023/24 sugar output is expected to climb 4.7% on year to 38.8 MMT, the second most ever, as crops recover from the previous season's adverse weather.
Elsewhere, funds cut only 520 contracts of their net long position in raw sugar for a still large total of 164,115 lots in the period, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.
We have maintained in our previous reports about the possible continuation of uptrend in sugar price given the global supply uncertainty amid changing weather patterns. The latest weather forecast suggests that global supplies may be stressed from the hot climate, which could ultimately lead to the strengthening of prices. However, for now, the Brazilian sugar harvest are undercutting the price forecast. The resolution of the U.S. debt ceiling logjam may help clear the clutter around demand uncertainty.
For Monday, support for the July Sugar contract is at 24.84 cents and 24.31 cents, with resistance at 25.77 cents and 26.17 cents.
(By Commoditiescontrol Bureau: 09820130172)
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