Mumbai, 8 Jul (Commoditiescontrol): This week, sugar prices experienced moderate losses, with London sugar hitting a one-week low on Friday. The decline was driven by the Indian Sugar and Bio-energy Manufacturers Association's (ISMA) forecast of higher reserves, prompting a request for the government to permit surplus sugar exports.
Following ISMA's announcement, the October raw sugar contract on ICE fell to 20.14 cents per pound, down 0.39 cents or 1.9%. In the previous session, the contract had reached a 2.5-month high. The August ICE white sugar contract in London dropped by $9.30, or 1.6%, settling at $575.00 per metric ton.
ISMA's forecast maintained India's 2023/24 sugar reserves at 9.1 million metric tons (MMT), with a surplus of 3.6 MMT. The association urged the government to reconsider export restrictions. India had extended its restrictions on sugar exports from October 31 until further notice to ensure adequate domestic supplies. During the 2022/23 season, India allowed mills to export only 6.1 MMT of sugar, down from a record 11.1 MMT in the previous season. As the world's second-largest sugar producer, India's decisions significantly impact global markets.
Brazil, the top sugar producer, exported 3.20 million tons of sugar in June, up from 2.87 million tons a year earlier. Dry weather in Southeast Asia and Latin America, particularly in Brazil, has continued to support sugar prices. Additionally, a fungal disease affecting sugar crops in Uttar Pradesh, India, has contributed to firm prices.
Adjustments in Brazil's sugar production estimates have significantly influenced prices. The industry group UNICA reported higher-than-expected sugar production and cane crushing levels for the first half of June, despite initially lower forecasts. However, the sharp decline of the Brazilian real has tempered market optimism, leading to increased export sales by Brazilian producers.
Earlier in the week, sugar futures in both New York and London demonstrated resilience, bolstered by India's decision to maintain export restrictions, which has stabilized the global market. Traders responded to concerns over lower-than-expected global production levels by covering short positions, further boosting prices.
Weather conditions remain a critical factor in market dynamics. Persistent dry weather in Brazil has raised concerns about the health and yield potential of cane crops essential for sugar production. In India, the progress of the monsoon, crucial for sugarcane growth, is being closely monitored, with significant rainfall deficits in central regions affecting crop yields and planting schedules.
Looking ahead, market analysts at Czarnikow (CZ) predict a global sugar surplus of 5.5 MMT for the 2024/25 season due to increased production in major sugar-producing regions. However, Copersucar, the world's largest sugar merchant, remains cautiously optimistic about mid-term sugar prices, citing potential production reductions in Brazil due to adverse weather conditions.
The recent surge in sugar prices has also been driven by speculative traders reducing their net short positions. The Commodity Futures Trading Commission reported that speculators cut their short position in raw sugar on ICE U.S. by 12,547 lots to 35,813 lots. Analysts are closely watching technical support and resistance levels for the October sugar contracts, identifying key levels at 19.92/19.71 cents and 20.51/20.89 cents, respectively.
This week's developments highlight the significant influence of global production forecasts and weather conditions on sugar prices. As the market navigates these factors, the upcoming weeks will be crucial in determining future trends and stability.
(By Commoditiescontrol Bureau: 09820130172)
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