Mumbai, 22 Jul (Commoditiescontrol): The sugar market is navigating turbulent waters, as traders balance between fluctuating production forecasts and variable weather conditions, leading to significant price movements. Apparent selling pressure has pushed ICE sugar futures to 1.5-month lows by Friday, driven by projections of a global surplus for the 2024/25 season. This comes amid rising production in Brazil and uncertain monsoon patterns in Southeast Asia, particularly India.
The natural sweetener faced substantial pressure this week, with Covrig Analytics projecting a global sugar surplus of 182,000 metric tons (MT) for 2024/25, a stark contrast to their previous estimate of a 2.6 million MT deficit. The weakening Brazilian real, which fell to a two-week low against the dollar, further fueled the decline by encouraging Brazilian producers to sell more sugar.
The October raw sugar contract on ICE dropped by 0.28 points, or 1.48%, closing at 18.66 cents per pound, after hitting a low of 18.55 cents—the lowest since June 3. The contract saw a weekly loss of 2.8%, following a 4.6% decline the previous week. Similarly, the August ICE white sugar contract in London fell by $4.30, or 0.79%, closing at $541.20 per metric ton.
Analysts attributed some of the market's downturn to improved crop prospects in Asia, with increased production expected from India and Thailand. Despite these production hikes, demand remains strong, with Brazil, the top exporter, shipping 50% more sugar in the first half of the year.
Earlier surges in sugar prices were largely due to below-normal monsoon rains in India, the world’s second-largest sugar producer. As of July 15, India had received 287.7 mm of rain, 2% below the long-term average. Meanwhile, Brazil's sugar production areas have experienced irregular rainfall. According to Unica, Brazil’s sugar production for the 2024/25 crop year through June increased by 15.7% year-on-year to 14.2 million MT. The proportion of Brazil’s sugar cane crop crushed for sugar rose to 48.72% from 47.69% last year.
Throughout the week, sugar prices experienced moderate declines, with London sugar hitting a one-week low on Friday. This was influenced by the Indian Sugar and Bio-energy Manufacturers Association’s (ISMA) forecast of higher reserves, prompting calls for the government to allow surplus sugar exports. ISMA maintained India’s 2023/24 sugar reserves at 9.1 million MT, with a surplus of 3.6 million MT, urging the government to reconsider export restrictions. India extended its export restrictions from October 31 until further notice to ensure adequate domestic supplies. In the 2022/23 season, India permitted mills to export only 6.1 million MT of sugar, down from a record 11.1 million MT the previous season.
Brazil exported 3.20 million tons of sugar in June, up from 2.87 million tons a year earlier. Persistent dry weather in Southeast Asia and Latin America, especially in Brazil, has supported sugar prices. Additionally, a fungal disease affecting sugar crops in Uttar Pradesh, India, has contributed to firm prices.
Earlier in the week, sugar futures in New York and London showed resilience, bolstered by India’s decision to maintain export restrictions, which helped stabilize the global market. Traders covered short positions in response to concerns over lower-than-expected global production levels, further boosting prices.
The Commodity Futures Trading Commission (CFTC) reported that speculators increased their short positions in raw sugar on ICE U.S. by 1,303 lots to 7,857 lots. Analysts are closely monitoring technical support and resistance levels for the October sugar contracts, identifying key levels at 18.47/18.29 cents and 18.92/19.19 cents, respectively.
As the sugar market contends with global surplus projections and variable weather impacts, traders must stay vigilant to navigate these fluctuating conditions effectively.
(By Commoditiescontrol Bureau: 09820130172)
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