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Weekly: ICE raw sugar post weekly loss as Brazil sugar production gathers pace

19 Feb 2024 9:00 am
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Mumbai, 19 Feb (Commoditiescontrol): Sugar prices have returned to losses during the week ended Feb 16th, as improved weather condition in Brazil lifted sugar cane prospect while sugar mills in the world's largest exporter operated at full steam.

ICE raw sugar prices ended moderately higher on Friday, recovering from four week low, as forecast of reduced rains in Brazil triggered short-covering. A prediction of sharp increase in Brazil's sugar production on Thursday had set a negative tone for the natural sweetener.

ICE sugar futures for March delivery settled up 0.26 or 1.1% at 23.08 cents per lb, having earlier hit its lowest since mid-January at 22.71. It lost 3.9% in the week.

May London white sugar contract rose 1.2% at $638.30 a metric ton. March contract which expired on Wednesday witnessed a total of 261,950 metric tons of white sugar tendered.

Dealers said output in top producer Brazil will remain strong close to the record current crop, and that poor crops in India and Thailand are mostly priced in.

There was chat among traders of a better end of crop in India, with some wondering if the government would allow limited exports.

Raw sugar prices are expected to post an annual gain of nearly 20% in 2024, a Reuters poll showed.

Earlier this month, Sugar prices surged to multi-month higher finding support from consulting firm Safras & Mercado cutting its 2024/25 Brazil Center-South sugar cane crush estimate to 650 MMT from earlier forecast of 670 MMT, citing drier-than-normal conditions.

Analyst Green Pool downgraded its forecast for the 2024/25 cane crop in CS Brazil late last week, saying that some yield potential had already been lost.

StoneX raised its 2023/24 global sugar surplus estimate to 3.4 MMT from a previous estimate of 730,000 MT due to increased sugar output in Brazil.

Sugar complex benefited from the supportive fundamentals. Adverse weather conditions in the growing regions such as Thailand raised global supply concerns. The strong undertone helped stem the selling pressure from weaker Brazilian Real weighed on sugar futures. The real dropped to a 3-month low against the dollar Monday, encouraging export selling by Brazil's sugar producers.

The global sugar deficit is expected to widen to 788,000 tons in the 2024/25 year, meaning supplies will remain tight and prices are likely to stay high, analyst Green Pool said on Tuesday in its initial forecast for the crop year.

India said on Friday that it has allowed mills to convert 1.7 million metric tons of sugar for ethanol production but there were no plans to divert more sugar.

Meanwhile, Indian Sugar Mills Association (ISMA) reported that India's 2023/24 sugar output during the Oct -Jan 31 period fell 3.2% on year to 18.7 MMT.

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. Also, the update from sector trackers made unpleasant read. Ukraine's 2023 white beet sugar output jumped to 1.8 million metric tons from around 1 million in 2022, the agriculture ministry said on Thursday, after farmers increased the area sown to sugar beet.

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.

Trading Commission (CFTC) data on showed speculators have added 5,950 contracts to their net long position in raw sugar to 13,107 lots.

Weather conditions in the sugar cane growing region posed challenges in recent time. Several industry reports including Unica, have pegged a sharp rise in Brazilian sugar production. That should help cut global deficit prospect. However, 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 May Sugar contract is at 22.22 cents and 21.86 cents, with resistance at 22.91 cents and 23.24 cents.

(By Commoditiescontrol Bureau: 09820130172)

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