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Weekly: ICE raw sugar post fourth straight weekly fall on ample supply prospect

4 Dec 2023 9:01 am
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Mumbai, 4 Dec (Commoditiescontrol): Sugar emerged as a brighter spot among agri-commodities earlier on rising supply constraints. But, the prospects of natural sweetener has changed in recent times due to rising output and reports of falling global deficit. Eventually, the commodity clocked its fourth straight weekly loss.

On Friday, ICE raw sugar prices ended lower, on increased sugar output prospect in Brazil helped tame supply concerns and is undercutting prices. Conab raised its 2023/24 Brazil sugar production estimate to 46.9 MMT from an August estimate of 40.9 MMT.

Sugar prices have been on the decline, retreating from a 12-year high recorded earlier this month, on increased supplies from Brazil. However, rise in crude oil prices helped check the decline in the prices of natural sweetener.

Brazilian supplies have gathered pace in recent times. 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 0.95 cent, or 3.6% lower at 25.09 cents per lb after setting a three-month low of 24.95 cents. It ended the week 7% lower, posting their fourth straight week of losses. The front month hit a 12-year high of 28.14 cents on Nov 7.

March London white sugar fell $20.30, or 2.8%, to $696.80 a tonne. For the week, the contract ended 5.58% lower. 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 the strong pace of production in Brazil was keeping the market on the defensive.

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.

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.

Imports of Ukrainian sugar into the European Union grew tenfold last season and extended their rise at the start of the current 2023/24 season to the detriment of Brazil which is on track of losing its leadership in the bloc.

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.

Funds reduced their bullish bets in raw sugar futures significantly during the week to Nov 28, the data from from the Commodity Futures Trading Commission (CFTC) showed on Friday. Speculators cut 19,908 contracts to their net long position in raw sugar, taking it to 121,729 lots in the period.

Analysts have maintained cautious view due to increased selling of raw sugar during the annual rebalancing of commodity indexes in January. There is transference of longs from specs to trade and/or consumers in recent times, which is actually positive in the long run, analysts have said.

As, Sugar output fears have ebbed lower a bit due to UNICA report, which has also helped cut global deficit prospect. 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 24.64 cents and 24.18 cents, with resistance at 25.86 cents and 26.62 cents.

(By Commoditiescontrol Bureau: 09820130172)

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