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Weekly: ICE Sugar Futures End 7-Week Losing Streak

27 May 2024 8:55 am
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Mumbai, 27 May (Commoditiescontrol): Sugar prices made a significant recovery during the week ending May 24, buoyed by a weaker dollar and a series of declines that triggered short covering. However, the strong outlook for sugar production kept traders' enthusiasm in check, balancing the market's upward momentum.

ICE sugar prices ended higher on Friday, driven by a weaker dollar that spurred short covering in sugar futures. This uptick follows seven consecutive weeks of declining prices due to increased sugar production in Brazil, which had bolstered the global supply outlook.

The July raw sugar contract rose by 0.15 cents, or 0.82%, to close at 18.41 cents per pound, marking a 1.5% gain for the week. In London, the August ICE white sugar contract increased by $6.20, or 1.15%, to settle at $545.90 per metric ton.

Market stability has been largely supported by the vigorous pace of cane crushing in Brazil's Centre-South region. Traders are eagerly awaiting data from industry group UNICA covering the first half of May. Brazil's strong sugar harvest has significantly influenced the bearish trend, with UNICA reporting that production in Centre-South Brazil reached 1.84 million tons in late April, an 84.25% increase from the previous year due to drier weather conditions. However, ongoing dryness remains a concern.

An S&P Global Commodity Insights analysts survey suggests that sugar production in Brazil's key Center-South region likely increased by 6.3% year-over-year to 2.7 million metric tons in the first half of May. Rabobank noted that recent price weaknesses can be attributed to Brazilian mills maximizing sugar output for two consecutive seasons.

Meanwhile, the United States Department of Agriculture (USDA) forecasts record sugar production of 186 million metric tons for the 2024/25 season (October-September), with demand projected to reach an all-time high of 178.8 million tons.

Globally, production shifts are also impacting the market. Datagro predicts a modest global surplus of 1.62 million metric tons for the 2024/25 season, reversing the previous season's deficit due to recovering production in Thailand and increased output in China. Conversely, India's sugar production has decreased by 1.6% year-over-year as of April 30.

Speculators have increased their bearish bets on ICE U.S. raw sugar futures. The Commodity Futures Trading Commission (CFTC) reported that funds expanded their net short position by 11,217 lots to 69,490 in the week ending May 21.

Traders are closely monitoring these developments, with technical support for the July sugar contract at 18.13 and 17.86 cents, and resistance at 18.58 and 18.76 cents. Given the rising production in Brazil and evolving global supply dynamics, sugar prices are expected to remain volatile in the near term.

As sugar prices navigate the complexities of global supply and demand dynamics, the interplay between supportive factors like a weaker dollar and short covering, and the cautious optimism due to robust production forecasts, will likely continue to influence market trends. Traders will need to stay vigilant, closely monitoring both global production reports and economic indicators, to navigate the potential volatility ahead.

(By Commoditiescontrol Bureau: 09820130172)


       
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