Mumbai, 26 Feb (Commoditiescontrol): Sugar prices have extended losses for the second week in a row, feeling the pressure from robust Brazil lifted sugar cane prospect as improved weather condition is expected to boost sugar mills operating at full steam. That's bearish for natural sweetener which is currently undergoing correction in prices after having reached highest level over a decade last month.
ICE raw sugar prices settled lower up on Friday, as weaker Real encouraged exports by Brazilian sugar producers. In complex has carried forward previous session negative sentiment caused by ample domestic supplies in India. Weakness in the Brazilian real undercut sugar prices as the real on Friday dropped to a 2-week low against the dollar. However, a softer dollar applied check on price drop.
For entire week week the sugar complex maintained softer tone with sugar price dropping to one-month low, as significant increase in Brazil's sugar production applied pressure. The forecast issued had set a negative tone for the natural sweetener.
ICE sugar futures for March delivery settled down 0.21 or 0.92% at 22.31 cents per lb. Last week, the contract hit its lowest since mid-January at 22.71 while losing 3.3% week on week.
May London white sugar contract lost $7.60 or 1.23% at $607.50 a metric ton. March contract which expired last Wednesday and witnessed a total of 261,950 metric tons of white sugar tendered.
Dealers said rains in Brazil this week had boosted the outlook for the cane crop in the Centre-South region although there remain concerns that dry conditions earlier in the year will adversely impact production. Mills in Brazil already hedged 72% of expected new-crop exports, a report said on Tuesday
Also weighing on sugar prices was chat among traders about the possibility of No.2 producer India allowing limited exports.
India will raise the floor price that mills must pay for sugarcane in the 2024/25 season by 8% as the world's second-largest sugar producer tries to boost output and please farmers ahead of a general election this year.
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.
Last Friday, India 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.
As observed in the previous week report, the 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 21.58 cents and 21.34 cents, with resistance at 22.22 cents and 22.62 cents.
(By Commoditiescontrol Bureau: 09820130172)
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