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Weekly: Sugar futures post second straight week of loss on easing supply, global deficit concerns

20 Nov 2023 8:31 am
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Mumbai, 20 Nov (Commoditiescontrol): Sugar posted second straight week of loss on ample supplies from Brazil, the largest exporters, fuelled by favourable sugar cane harvesting conditions in the top region, which has also helped ease global sugar deficit outlook.

ICE raw sugar prices ended little changed on Friday, as global sugar deficit prospects concerns are diluted by robust Brazilian production. However, firm Real discourages export selling from Brazil's sugar mills.

On the other hand, London white sugar prices rose, gaining strength from the International Sugar Organization (ISO) bearish forecast. The global sugar body has raised its 2023/24 global sugar production (Oct-Sep) estimate to 179.9 MMT from a previous estimate of 174.8 MMT and cut its 2023/24 global sugar deficit to -335,000 MT from a prior forecast of -2.1 MMT.

ICE sugar futures for March delivery settled little changed at 27.18 cents per lb. It has ended 0.4% lower for the week, the second straight week of losses. The front month hit a 12-year high of 28.14 cents on Nov 7.

December London white sugar rose $2.90, or 0.4%, to $736.60 a tonne. For the week, the contract eased 1.4%. A total of 262,750 metric tons of white sugar has been tendered against the December contract on ICE Futures Europe, exchange data showed on Thursday.

Dealers said improved macro-economic signals should boost sugar in the short term, as should the fact that top producer Brazil is fast approaching the end of its harvest. Longer term however, sugar fundamentals are turning more bearish.

Earlier this week, sugar prices came off their highs on increased Brazilian supply prospect helped by hot and dry weather conditions in the country allowing mills to extend the crushing season. Report By Unica showed surge in output in second half of October.

Sugar production in centre-south Brazil in the second half of October totalled 2.35 million metric tons, up 9.4% from the same period last year, Brazil sugar industry group UNICA reported on Friday.

The market remains underpinned by the prospect of El Nino curbing production in India and Thailand while logistical bottlenecks are a concern in top exporter Brazil.

Last Tuesday, sugar prices rallied to 12-year highs on the outlook for tighter global sugar supplies. Further, congestion in Brazil's ports restricted sugar exports and hence a 10% drop from September.

In other news, India's sugar production is expected to fall while Thailand may impose restriction on sugar exports. The South-East Asian country reversing a 20% increase in domestic sugar prices after the commodity was classified as a controlled good has further exerted pressure. There's likelihood of India curbing sugar exports.

Thailand's deputy commerce minister said the country would categorize sugar as a controlled commodity in an attempt to control inflation and maintain food security, which would require a regulating panel to approve Thailand's sugar exports of a ton or more.

India restricting sugar exports and drought impacting Thailand's sugar output. India's sugar output is likely to fall 8% in 2023/24.

Indonesia's white sugar output is seen down 4% this year at around 2.3 million metric tons as dry weather hits harvests.

Elsewhere, Ukraine has increased exports of sugar this year even though its Black Sea ports are blocked because of the conflict with Russia, Ukrainian agricultural business association UCAB said.

Funds increased their bullish bets in raw sugar futures during the week to Nov 14, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Speculators added 3,039 contracts to their net long position in raw sugar, taking it to 138,699 lots in the period.

We are experiencing a transference of longs the last two days from specs to trade and/or consumers. That is actually positive in the long run.

As observed in the previous week, Sugar output fears have ebbed lower a bit due to UNICA report, which was further accentuated by reduced global deficit. Yet, drought conditions in the growing region such as Thailand has forced analysts to readjust their production estimates and the availability of the sweetener during the busy season. However, with ample supplies from Brazil and India, there is possibility of supply strain easing further. Overall, the bullish price pattern remains unaltered though funds have decided to cut their long position. A clarity on production in necessary before taking a fresh bet.

For Monday, support for the March Sugar contract is at 27.01 cents and 26.85 cents, with resistance at 27.33 cents and 27.49 cents.

(By Commoditiescontrol Bureau: 09820130172)

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