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Weekly: ICE raw sugar futures rally for fourth-week in a row; Brazilian sugar output dampen prospect

29 Jan 2024 8:48 am
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Mumbai, 29 Jan (Commoditiescontrol): Sugar prices have carved out gains during the week ended Jan 26th even as growing sugar output in Brazil has emerged as a latest overhang. However, that has hardly prompted traders to boost short positions. In fact, they have exploited this information to cut short position, sugggesting the future prospect.

ICE raw sugar prices ended lower on Friday, moving further away from a seven-week high, as reports of sharp increase in Brazil's sugar production helped reduce availability concerns. Obviously, the fresh assessmnet has undercut price rise caused by the India's trade body forecasting lower output in the world's second largest producer.

ICE sugar futures for March delivery settled 0.27 cent, or 1.1%, lower at 23.77 cents per lb after hitting its highest since early December at 24.62 cents. The contract gained only 0.8% in the week, after a large gain of 9% in the previous week.

March London white sugar contract fell $7.20 or 1.1% to $668.10 a ton. The contract gained 0.68% this week.

Dealers said poor crops in Asia had tightened supplies and there remained concerns that dry weather in Brazil could curb production in the world's top exporter.

In its latest update on Thursday, Unica reported Brazil's Center-South sugar output jumped 148.6% on year in the first half of January to 48,000 MT. Further, the sugar output in the 2023/24 crop year through mid-January rose 25.5% on year to 42.099 MMT. Meanwhile, more sugarcane is being crushed for sugar than ethanol, as 49% of cane was crushed in the 2023/24 crop year through mid-January for sugar production compared to 45.95% last year.

Earlier in the week, Indian Sugar Mills Association (ISMA) reported that India's 2023/24 sugar output during the Oct -Jan 15 period fell 5.3% y/y to 14.95 MMT.

Sugar prices are also benefiting from India contemplating an increase in floor price mills pay for sugar cane amid signs of maintaining sugar exports ban. Global supplies will be curtailed by India's decision of 50% export tax on molasses from sugar refining. That reduces the likelihood that India will lift its sugar export curbs in the foreseeable future.

Last week, sugar prices rallied as El Nino weather pattern is likely to curtail global sugar output, triggering fresh buying activity in the natural sweetener. Further, the signs of India imposing ban on sugar exports extended support to sugar prices.

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

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

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.

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 reduced their short position by cutting 8,382 lots to their net short position and now hold a net short of 2,227 contracts in the sweetener.

The recent reports on sugar output from various research outfits such as Unica have suggested a sharp rise in Brazilian production, which has helped cut global deficit prospect. Yet, the drought conditions in growing region such as Thailand remains a concern. Traders have started changing their bearish views recently. 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 23.50 cents and 23.22 cents, with resistance at 24.19 cents and 24.60 cents.

(By Commoditiescontrol Bureau: 09820130172)


       
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