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Weekly: ICE raw sugar futures gains for third week in a row amid global supply concerns

22 Jan 2024 8:59 am
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Mumbai, 22 Jan (Commoditiescontrol): Sugar has emerged successful in replicating its recent winning streak. It was a third straight week of gains for the natural sweetener, which has been reaping benefits of tight supply concerns led by weather conditions and traders opting to cover their short positions in a hurry.

ICE raw sugar prices closed higher on Friday, advancing to more than seven-week high, as El Nino weather pattern is likely to curtail global sugar output, triggering fresh buying activity in the natural sweetener. The current

Sugar prices are also seeing support from signs that India's ban on sugar exports will be maintained and keep global supplies tight after India announced a 50% export tax on molasses from sugar refining. That reduced prospect of India lifting its sugar export curbs in the foreseeable future.

ICE sugar futures for March delivery settled higher 0.53 cent, or 2.3%, at 23.57 cents per lb. For the week, the contract added 9.06%.

March London white sugar contract rose 1.89% or $12.30 at $663.60 a ton. The contract gained 7..4% during the week.

Sugar imports by top commodities consumer China fell 4.3% in December to 500,000 metric tons, data showed.

Last Thursday, Unica reported Brazil's Center-South sugar output jumped 35.6% on year in the second half of December to 236,000 MT. However, a supportive factor for sugar was Friday's rally in the Brazilian real to a 2-week high against the dollar, discouraging export selling from Brazil's sugar producers.

Sugar output from Brazil's top producing region could jump to a record 43.1 million metric tons in 2024/25 despite lower supplies of cane, sugar and ethanol consultancy Datagro said.

U.S. sugar output was revised upwards by the USDA on Friday, as industries reported better results.

Dealers said there was some concern about dry weather in Centre-South Brazil which could lead to crop downgrades although rains are currently forecast for the second half of this month. They also noted the ongoing crisis in the Red Sea was curbing imports of white sugar into East Africa.

In recent times, the natural sweetener is overwhelmed by bearish factors, including improved global supply conditions. Major exporters Brazil and Thailand are witnessing strong production. Brazil exported 75% more sugar in December from a year ago, the government said. Thailand is expected to produce 8-8.5 million tonnes of sugar in the 2023/24 production year.

China's sugar output in the 2023/24 season is seen at 3.2 million metric tons, down 60,000 metric tons from a year earlier. Recently, China's National Development and Reform Commission (NDRC) pegged sugar imports in 2023/2024 at 5 million tons, slightly up, while consumption is expected to steady at 15.5 million tons.

Meanwhile, Egypt's state grains buyer is seeking 50,000 metric tons of raw cane sugar and/or 50,000 tons of white sugar in a tender. The lowest price offered is estimated at $530 a ton CIF free out for raw sugar. Egypt's sugar reserves are sufficient for 5.2 months, the country's state news agency said.

French sugar major TereosTEREO.UL said its sugar output in Brazil grew 19% in the 2023/2024 harvest, along with better-than-expected sugarcane crushing.

Elsewhere, India, the world's second-largest sugar maker, is likely to produce 32.5 million tons of sugar in the 2023/24 marketing year that began on Oct. 1, an industry body said.

Earlier this month, the National Federation of Cooperative Sugar Factories reported India's sugar production from Oct 1-Dec 31 totaled 11.2 MMT, down 7.6% on year. That observation help keep floor under prices.

Indonesia has set this year's sugar import quota at 4.77 million tons for industrial use, a trade ministry official said on Thursday, up from a quota of 3.6 million tons in 2023.

The International Sugar Organization (ISO) bearish outlook too impacted prices. 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.

Trading Commission (CFTC) data on Friday showed speculators have boosted their short position by adding 1,869 lots to their net short position and now hold a net short of 10,608 contracts in the sweetener.

Interestingly, the recent reports on sugar output from various research outfits such as Unica have suggested a sharp rise in Brazilian production. That helped cut global deficit prospect. However, drought conditions in the growing region such as Thailand presented a big challenge to research outfits view. Traders, on the other hand, continue to maintain a bearish outlook. Hence, they have resorted to raising their short bets. Meanwhile, analysts are forced to readjust their production estimates and availability of the sweetener. Overall, the bullish price pattern remains unaltered though funds have decided to increase their short position. A clarity on production is necessary before taking a fresh bet.

For Monday, support for the March Sugar contract is at 23.16 cents and 22.74 cents, with resistance at 23.87 cents and 24.16 cents.

(By Commoditiescontrol Bureau: 09820130172)

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