Mumbai, 11 Jun (Commoditiescontrol): Sugar prices rebounded this week as weather related concerns seen impacting output at the major producing regions even as strength of a dollar looked to keep buying activity fairly restricted. The natural sweetener made a resounding comeback after having posted losses for the last four-weeks in a row. Supply concerns were eased initially as harvesting picked a pace in Brazil. But that proved to be a short-term relief as more bad news emerged from India. Monsoon was delayed in south-east region due to El-Nino effect, weather forecast suggested. The sweetener was also supported by the retreat in dollar index from a 2-month high.
ICE Raw Sugar prices settled marginally lower on Friday, as strength in dollar made buying natural sweetener costly for non-dollar buyers. In the previous session sugar gained as El Nino weather pattern raised supply concern, amid lack of sales from Brazil and other Latin American countries.
ICE sugar futures for July delivery settled down 0.10 cent, or 4%, at 25.38 cents per lb. It hit a 6-1/2 week low of 24.23 cents hit on Tuesday. London August white sugar futures lost $7.90, or 1.15%, to $680.90 a tonne. ICE raw sugar added 2.63% for week while London sugar edged 0.76% lower.
Dealers said the recent run-up was largely driven by weather concerns, with an El Nino weather event likely to lead to drier than normal weather in major Asian producers such as India and Thailand, which could curb production.
El Nino could also lead to wet weather in Centre-South Brazil, with the potential to disrupt the end of the cane harvest.
Meanwhile, monsoon rains finally reached India, the world's second largest sugar producer, on Thursday, marking their latest arrival in seven years and potentially delaying sugar planting. There is a forecast for rains in Brazil's main sugar region, which could disrupt the sugarcane harvest.
Indonesia, one of the world's top sugar importers, said it wants to raise white sugar output to 2.6 million tonnes this year, and expects imports to fall below 1 million tonnes.
The natural sweetener garnered support from Thursday's bi-annual report of the USDA that projected a fall in global sugar ending stocks for 2023/24 to a 5-year low. As per the report, the global sugar production is likely to climb 6.0% on year to a record 187.881 MMT and sugar consumption is likely to 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.
Sugar prices have been on a roll since last month after prospect of tight supplies emerged.
In May, 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.
However, traders are not taking any chance and have been reducing their long position. As per the latest, Commitment of Traders report, funds cut 12,151 contracts of their net long position in raw sugar, taking it to 135,002 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.
For the next week, the traders will stay agile to news flow from the FOMC meet. The Federal Reserve is broadly expected to pause its recent deluge of rate hikes as most key indicators are suggesting.
For Monday, support for the July Sugar contract is at 24.75 cents and 24.49 cents, with resistance at 25.51 cents and 26.01 cents.
(By Commoditiescontrol Bureau: 09820130172)
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