Mumbai, 2 Sep (Commoditiescontrol): Sugar futures rebounded strongly in the week ending August 30, hitting a seven-week high amid growing concerns over declining production in Brazil and adverse weather conditions. Wildfires in northern São Paulo, a key sugar-producing region, have ravaged sugarcane fields, prompting Brazil’s government crop agency, Conab, to lower its 2024/25 sugar production forecast. Additionally, record heat in Thailand is threatening its sugarcane crops, adding further upward pressure on global sugar prices. However, optimism surrounding India's sugar crop, supported by above-average monsoon rains, is tempering these bullish factors.
On Friday, raw sugar futures experienced a decline due to profit-taking and the Brazilian real weakening to a three-week low against the U.S. dollar. Despite this dip, sugar ended the week with a solid 5% gain, consolidating just below Thursday's six-week high. The October raw sugar contract fell by 0.51 cents, or 2.6%, to settle at 19.38 cents per pound, down from the previous session’s peak of 19.98 cents. In London, October white sugar futures dropped by 1.9%, closing at $546.80 per ton.
The recent surge in sugar prices was largely fueled by concerns over extensive fires in Brazil’s Center-South region. These fires have significantly damaged crops in São Paulo, Brazil’s top sugar-producing state. According to Orplana, a sugar cane industry group, the fires affected up to 80,000 hectares of planted sugarcane, with Green Pool Commodity Specialists estimating a loss of up to 5 million metric tons of sugarcane due to the fires.
In response to these developments, Brazil’s crop forecasting agency, Conab, revised its 2024/25 sugar production estimate for the Center-South region down to 42 million metric tons from 42.7 million metric tons, citing reduced yields caused by drought and excessive heat.
Further supporting prices, the International Sugar Organization (ISO) forecasted a global sugar deficit of 3.58 million metric tons for the 2024/25 season. This deficit outlook is compounded by India’s decision to lift restrictions on sugar mills producing ethanol for the upcoming season, a move that could prolong the country’s sugar export curbs, which have been in place since October 2023 to ensure sufficient domestic supplies.
Meanwhile, speculative traders have increased their bearish positions on raw sugar futures. Funds added 20,237 lots to their net short position, bringing it to 65,922 contracts as of August 20, according to CFTC data.
Traders are now closely monitoring key support and resistance levels as global supply uncertainties and broader economic factors suggest continued volatility in the sugar market.While sugar prices have surged on production concerns and weather risks, the market remains vulnerable to shifts in global demand and currency movements, signaling potential volatility in the weeks ahead. Traders and investors will need to stay alert as the delicate balance of supply and demand plays out on the global stage.
(By Commoditiescontrol Bureau: 09820130172)
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