Mumbai, 12 Aug (Commoditiescontrol): Sugar prices continued to edge lower, driven by improved weather conditions in key growing regions like India and Thailand, along with robust output prospects in Brazil. As traders adjusted their positions to accommodate these changing fundamentals, the market remained under pressure, with hopes pinned on the upcoming festival season to provide some support.
On Friday, sugar prices approached a near two-year low, weighed down by optimism over a strong sugar crop in India. The October raw sugar contract declined by 0.09 cents, or 0.5%, settling at 18.48 cents per pound. Earlier in the week, the contract had dipped to 17.64 cents, the lowest level since September 2022. Meanwhile, the October white sugar contract in London held relatively steady at $526.00 per ton.
The downward trend in sugar prices was largely driven by expectations of increased production in India, spurred by a favorable weather forecast from the Indian Meteorological Department predicting higher rainfall. This has bolstered hopes for a bountiful sugar crop, further supported by India’s substantial sugar reserves. According to the Indian Sugar and Bio-energy Manufacturers Association (ISM), reserves for the 2023/24 season are estimated at 9.1 million metric tons (MMT), with a surplus of 3.6 MMT. The ISM has urged the government to lift export restrictions, which could potentially increase global supplies and put further pressure on prices.
Brazil’s record sugar production, as projected by Conab, is also contributing to concerns of market oversupply. Despite record heat in Thailand impacting sugarcane yields, overall global production remains strong.
Market participants are now awaiting key data from industry group Unica on cane and sugar production in Brazil’s crucial Centre-South region. A recent survey by S&P Global Commodity Insights projected a median sugar production forecast of 3.6 million tons for the second half of July, down 2.4% from the previous year.
The market has been supported by speculation that the Indian government may maintain its export restrictions despite pressure from sugar millers to ease them. Additionally, ongoing dry weather conditions in Brazil, a major sugar-producing region, have contributed to a more bullish outlook.
As traders navigate the uncertainty surrounding Brazil's weather conditions and potential policy changes in India, they are closely monitoring key support and resistance levels for the October contracts, currently set at 18.23/17.99 cents and 18.80/19.13 cents per pound, respectively. These factors are likely to play a critical role in shaping the market’s direction in the coming weeks.
With the global sugar market at a crossroads, the interplay of favorable weather in India, robust production in Brazil, and potential policy shifts will likely dictate price movements. As the festival season approaches, traders remain cautious, awaiting further developments that could either stabilize or further unsettle the market.
(By Commoditiescontrol Bureau: 09820130172)
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