Mumbai, 26 Aug (Commoditiescontrol): Sugar prices reversed their downward trend during the week ending August 23, supported by optimism surrounding a potential Federal Reserve rate cut, which boosted confidence in broader financial markets.
On Friday, raw sugar futures on ICE saw significant gains, rising by 3% as investors increased their positions in agricultural commodities. This uptick followed dovish comments from Federal Reserve Chair Jerome Powell, signaling a potential interest rate reduction. The October raw sugar contract settled 0.54 cents higher at 18.39 cents per pound, marking a 2% gain for the week. In London, October white sugar also climbed by $13.60, or 2.7%, closing at $525.70 per metric ton.
Dealers attributed the recovery from the near two-year low of 17.52 cents, observed earlier in the week, to technical factors and positive macroeconomic news. The rally was further fueled by fires in Brazil’s key sugar-producing region, leading to the closure of a large mill owned by Raizen, alongside a reduced production forecast from Brazil’s government crop forecasting agency, Conab. The agency revised its 2024/25 sugar production estimate for Brazil's Center-South region down to 42 million metric tons (MMT), from an earlier forecast of 42.7 MMT, due to lower sugarcane yields caused by drought and extreme heat.
Despite these bullish developments, Brazil’s Center-South sugar production for the 2024/25 marketing year through July rose by 8% year-on-year, reaching 20.753 MMT, according to Unica. However, concerns over a bumper sugar crop in India, driven by above-average monsoon rains, present a bearish factor for prices. The Indian Meteorological Department reported that the country received 632.5 mm of rain during the current monsoon season, 3% above the long-term average, raising expectations for increased sugar production.
India’s sugar reserves for the 2023/24 season stand at 9.1 MMT, with a surplus of 3.6 MMT. To maintain domestic supplies and enhance ethanol production, India has restricted sugar exports since October 2023. Only 6.1 MMT of sugar exports were permitted during the 2022/23 season, a sharp decline from the record 11.1 MMT in the previous year. The Indian Sugar and Bio-energy Manufacturers Association (ISM) has confirmed that these export curbs will continue.
In Thailand, record-high temperatures have raised concerns about potential damage to sugarcane crops, adding further support to sugar prices. The USDA's bi-annual report projected a 1.4% year-on-year increase in global sugar production for 2024/25, reaching a record 186.024 MMT, while global consumption is expected to rise by 0.8% to 178.788 MMT.
The International Sugar Organization (ISO) also provided a bullish outlook, raising its global sugar deficit estimate for 2023/24 to -2.95 MMT, up from a previous estimate of -689,000 MT in February, while revising global demand estimates upwards.
Speculative traders slightly reduced their bearish positions on raw sugar futures during the week of August 13, as per Commodity Futures Trading Commission (CFTC) data. Market participants are now closely watching key support and resistance levels for the October sugar contracts, currently set at 18.04/17.70 cents and 18.58/18.78 cents per pound, respectively.
As global supply uncertainties and macroeconomic factors continue to influence market sentiment, sugar prices are likely to remain volatile in the near term. Traders should stay vigilant to both technical signals and developments in key producing regions.
(By Commoditiescontrol Bureau: 09820130172)
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