Mumbai, 4 Jun (Commoditiescontrol): ICE Sugar prices continue to trend lower, posting their fourth straight week of losses as the recent surge triggered profit taking while the improved crop prospect in Brazil removed the premium that was created by supply concern.
ICE sugar futures extended losses on Friday, dropping to the lowest price in 1-1/2 months, weighed by output prospect in World's top exporter Brazil. The sweetener ended May with a 7.15% fall while consolidating below a nearly 12-year peak hit late in April.
Ramped-up Brazil sugar production is bearish for prices after Unica last Thursday 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.
ICE July raw sugar futures settled down 0.15 cent, or 0.6%, at 24.73 cents per lb, having hit a six-week low of 24.57. London August white sugar futures fell $4.00, or 0.6%, to $686.10 a tonne. For the week, ICE raw sugar futures are down 2.5%.
Brazil exported 2.47 million tonnes of sugar in May versus just 1.57 million a year ago, even amid the peak of the Brazilian soy export season, a sign that port operators are dealing well so far with the record or near-record crops of grains and sugar this year.
Rains in Brazil are expected to ease, allowing the harvest to progress, while there have been some pre-monsoon rains in India and some monsoon rains in Thailand, easing concerns linked to El Nino weather pattern.
Dealers noted improved macroeconomic sentiment linked to progress on a U.S. debt ceiling deal. However, concerns are developing over widespread delays in sugarbeet sowing in Europe due to wet weather and potential pest attacks in France, while heavy rains in top producer Brazil this week will likely impact cane crush.
Sugar prices will remain well supported near term, certainly until investors get a better idea on how the monsoon in No. 2 sugar producer India is progressing.
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.
Elsewhere, funds cut 21,963 contracts of their net long position in raw sugar, taking it to 147,153 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 has helped clear the clutter around demand uncertainty.
For Monday, support for the July Sugar contract is at 24.57 cents and 24.42 cents, with resistance at 24.88 cents and 25.04 cents.
(By Commoditiescontrol Bureau: 09820130172)
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