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Weekly: ICE raw sugar futures slid lower; increased sugar output in Brazil prompt liquidation

29 Apr 2024 8:55 am
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Mumbai, 29 Apr (Commoditiescontrol): Sugar prices extended their recent streak of decline during the week ended on April 26th as bearish fundamentals as well as dollar firmness made trend reversal impossible. Further, the broader weakness of agriculture commodities dampened the investor sentiment.

ICE raw sugar futures ended lower on Friday, due to increased sugar output in Brazil. Also, stronger dollar and softer oil prices applied pressure.

Brazilian crop agency - Conab, on Thursday projected that Brazil's 2024/25 sugar production will climb 1.3% y/y to a record 46.292 MMT as 2024/25 sugar acreage in Brazil increases by 4.1% to 8.7 million hectares (21.5 million acres), the most in seven years. For the 2023/24 marketing year, however, Conab last Thursday cut its Brazil sugar production estimate by 2.6% to 45.7 MMT from a November estimate of 46.9 MMT.

ICE sugar futures for May delivery settled down 0.08 cents or 0.5% at 19.40 cents per lb, after slumping to the lowest price since late December in the previous session. It lost 7.1% this week.

August London ICE white sugar contract edged up $0.10 or 0.02% at $563.70 a metric ton.

A total of 313,950 tons of white sugar have been tendered against the May contract on ICE Futures Europe, exchange data showed on Tuesday.

Dealers said the expiry of the May contract on Tuesday was likely to provide a major short-term focus early next week. They noted that about 1 million tons of sugar was expected to be delivered against the contract.

The forecast by Brazil government agency Conab for the planted sugarcane area is likely to pressure prices in the near term, they added.

In recent times, Sugar has been hit by ideas of better supplies from Asia and Brazil, but dealers said the fall attracted some bargain buying on Thursday.

Spell of rain in Brazil led the improved outlook for cane production in the 2024/25 season and a weakening of the Brazilian currency is likely boosting selling by mills there. Brazil's real hit a one-year low on Tuesday.

While robust sugar output in Brazil undercut prices, weaker Brazilian Real encourages exports. The natural sweetener was already under pressure due to the bearish carryover from last week's increased sugar production outlook.

Brazil's Center-South sugar output in the second half of March was 183,000 MT, up 9% from last year. Brazil's center-south sugarcane crushing totalled 5.04 million metric tons in the second half of March, data from industry group UNICA showed, up 6.5% from a year ago.

Last week, Vietnam's Office of the Cane and Sugar Board reported that Thailand's 2023/24 sugar production from Dec-Mar was 8.75 MMT, above a Feb estimate from the Thai Sugar Millers Corp for sugar production of 7.5 MMT.

India's sugar consumption this year is poised to hit a record high as demand during the peak summer season gets a boost from heat waves and the mobilisation of millions for elections in the scorching temperatures.

Brazil's sugarcane crush at the first half of April is seen nearly 15% up year-on-year in a S&P Global Commodity Insights survey of analysts. Industry group UNICA is expected to release the data later this week.

Earlier, the Indian Sugar and Bioenergy Manufacturers Association reported that India's 2023/24 sugar production from Oct-Mar rose 0.4% on year to 30.2 MMT as more sugar mills stayed open to crush sugarcane. As of March 31, 322 Indian sugar mills had closed operations, compared with 346 mills that were closed at the same time last year.

Egypt's GASC bought 250,000 tons of raw sugar in a tender.

Commodity Futures Trading Commission (CFTC) data on showed speculators have increased their net short position in raw sugar by 17,471 lots to 28,025 lots.

As we have mentioned earlier, sugar complex suffered a double whammy of improved supplies, due to favourable weather conditions in the growing region, and falling global demand. That's a big bearish factor for prices. Overall impact of improved weather condition is: rise in output and hence, the availability of sugar. 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 once again altered their price view to bearish. Analysts are forced to readjust their production estimates and availability of the sweetener.

For Monday, support for the Jul Sugar contract is at 18.86 cents and 18.64 cents, with resistance at 19.46 cents and 19.84 cents.

(By Commoditiescontrol Bureau: 09820130172)

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