Mumbai, 29 Jul (Commoditiescontrol): Sugar markets are under significant pressure due to ample global supply and robust crop prospects, particularly from Brazil. Despite recent drought conditions in the Latin American nation affecting output, sugar prices posted another week of losses. Raw sugar futures on ICE fell on Friday, driven by increased production in Brazil, expectations of better rainfall in India and Thailand, and projections of a global sugar surplus for the 2024/25 season. The October raw sugar contract settled down 0.24 cents, or 1.3%, at 18.42 cents per pound, following a 4.2% rise on Thursday due to lower-than-expected production data from Brazil. Despite this brief uptick, the contract fell 1.3% for the week, marking its third consecutive weekly loss after declines of 2.8% and 4.6% in the previous weeks. The August ICE white sugar contract in London also dropped $4.70, or 0.9%, to close at $526.70 per metric ton.
Citi reported that below-normal rainfall in Brazil, the top producer, suggests a weaker crop yield, potentially reducing output. Despite this, dealers noted that the market had become technically oversold after seven consecutive sessions of decline, making it ripe for an upward correction. Thursday’s report of lower-than-expected sugar production in Brazil's center-south region, which produced 2.94 million tons in the first half of July—a 9.7% year-on-year drop—further supported the market. This figure was significantly below market estimates.
Improved crop prospects in the Northern Hemisphere, particularly due to favorable monsoon rains, had previously pressured the market. Despite ongoing concerns about Brazilian yields and the allocation of cane to sugar production, traders highlighted the positive outlook for Asian production. Broker StoneX confirmed favorable prospects for Thailand, India, and Pakistan but reduced its Brazil estimate by nearly 2 million metric tons. The Cane Technology Center (CTC) reported a 1.5% decrease in agricultural yields in Brazil for June compared to the previous season, with expectations of further declines as the harvest progresses.
Improved crop prospects in the Northern Hemisphere have led some analysts to raise their projections for the 2024/25 season, anticipating increased production from key Asian producers, including India and Thailand. Despite these increases, global demand remains robust, with Brazil, the world's top sugar exporter, shipping 50% more sugar in the first half of the year. Earlier surges in sugar prices were driven by below-normal monsoon rains in India, the world's second-largest sugar producer, which as of July 15, had received 287.7 mm of rain, 2% below the long-term average.
Speculators significantly increased their bearish bets in raw sugar futures on ICE U.S. in the week to July 23, the Commodity Futures Trading Commission (CFTC) reported on Friday. Funds added 35,151 lots to their net short position in raw sugar, bringing it to 43,009 contracts. Analysts are monitoring key technical support and resistance levels for the October sugar contracts, identifying significant levels at 18.25/18.07 cents and 18.67/19.29 cents, respectively.
The sugar market continues to face downward pressure from ample supply and strong crop prospects, particularly in Brazil and Asia. Despite recent price upticks due to lower-than-expected production figures, the overall bearish sentiment remains dominant. Traders and analysts will be closely monitoring weather conditions and technical support levels in the coming weeks to gauge future price movements.
(By Commoditiescontrol Bureau: 09820130172)
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