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Weekly: Sugar post 3rd straight week of losses on ample supplies, receding global deficit

27 Nov 2023 8:54 am
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Mumbai, 27 Nov (Commoditiescontrol): Sugar has been on the losing side for quite some time. This week the natural sweetener clocked its third 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. Also, the cut in global sugar deficit as against previous estimate ensured the commodity price ease a bit.

On Friday, ICE raw sugar prices ended lower, retreating from a 12-year high recorded earlier this month, on increased supplies from Brazil and slide in crude oil prices.

The Latin American mills are expected to flood markets with increased sugar supplies to take advantage of weak local currency 'Real', which has slid to a 1-week low against the dollar.

ICE sugar futures for March delivery settled 0.24 cent, or 0.9% lower at 26.98 cents per lb. It ended 0.73% for the week, its third straight week of losses. The front month hit a 12-year high of 28.14 cents on Nov 7.

March London white sugar fell $8.10, or 1.1%, to $738.00 a tonne. For the week, the contract ended little changed. 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.

The market awaits cane and sugar production data for the key Centre-South region of Brazil. The data is expected to be issued in the next few days.

Sugar production in Brazil's Centre-South region is expected to total 2.15 million tons in the first half of November, up 28.4% year on year, according to a survey of analysts conducted by S&P Global Commodity Insights.

Dealers noted rains in Brazil and forecast for more wetter weather in coming days, which could drive some mills to end operations for the year.

Sugar prices remain underpinned by the prospect of El Nino curbing production in India and Thailand while logistical bottlenecks are a concern in top exporter Brazil.

Delayed beat sugar production in the European region due to heavy rains flooding the fields and concern of global output may help keep floor under the prices.

In recent time, sugar prices lost strength after the International Sugar Organization (ISO) forecast bearish outlook. 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.

In other news, India's sugar production is expected to fall while Thailand may impose restriction on sugar exports amid lower output prospect for 2023/24. 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.

Analysts said there could be some selling of raw sugar during the annual rebalancing of commodity indexes in January.

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 witnessing a transference of longs the last two days from specs to trade and/or consumers. That is actually positive in the long run, analysts have said.

Notably, 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 26.73 cents and 26.49 cents, with resistance at 27.30 cents and 27.63 cents.

(By Commoditiescontrol Bureau: 09820130172)

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