Mumbai, 9 Sep (Commoditiescontrol): Sugar prices experienced a turbulent week, swinging between gains and losses due to contrasting global factors. Early in the week, fears of crop losses in Brazil due to widespread fires helped prices reclaim crucial levels. However, favorable weather conditions in Southeast Asia, a major sugar-producing region, reversed those gains, providing an opportunity for bearish traders to increase their negative bets.
On Friday, sugar prices faced moderate declines, pressured by falling crude oil prices. This decline in oil prices raised concerns that sugar mills might divert more cane towards sugar production rather than ethanol, thereby increasing sugar supplies. The October raw sugar contract fell by 0.31 cents, or 1.6%, settling at 18.91 cents per pound, resulting in a weekly loss of 2.4%. In London, October white sugar futures dropped by $3.80, or 0.71%, closing at $533.00 per ton.
In India, the world's largest sugar consumer, concerns over reduced cane output have led to expectations that the country will extend its sugar export ban for a second year, according to government sources. Meanwhile, forecasts of rainfall in Brazil have introduced a bearish sentiment, as improved weather conditions could boost next year's crop.
Last week, sugar prices had surged to 1.5-month highs due to severe drought and fires in Brazil, particularly in the state of São Paulo, a key sugar-producing region. The sugarcane industry group Orplana reported that approximately 80,000 hectares of sugarcane fields were affected by 2,000 fire outbreaks, with Green Pool Commodity Specialists estimating up to 5 million metric tons (MMT) of sugarcane lost.
Despite the recent decline, Citi’s Commodities team remains optimistic about sugar prices, forecasting that they could rise to 20 cents per pound in the coming months. The bank also highlighted that India’s continued absence from the export market will increase the global reliance on Brazil, where any crop setbacks or logistical issues could further tighten supplies and push prices higher.
Production forecasts for Brazil’s Centre-South region have been downgraded due to drought and fire damage. Datagro lowered its estimate to 39.3 million tons, and Czarnikow reduced its projection to 39.2 MMT from 40.0 MMT. Additionally, Covrig Analytics doubled its global sugar deficit estimate for the 2024/25 season to 600,000 metric tons.
However, ample rainfall in India and Thailand has eased some market concerns, tempering the recent bullish sentiment. Speculative traders have reduced their bearish positions on raw sugar futures, with funds cutting 28,805 lots, bringing the net short position to 37,117 contracts as of August 27, according to CFTC data.
As the market navigates these conflicting signals, key support and resistance levels at 18.63/18.35 cents and 19.40/19.89 cents per pound, respectively, will be closely watched. While the market remains volatile, traders are cautiously optimistic that sugar prices could see upward movement if adverse weather or supply issues persist.
(By Commoditiescontrol Bureau: 09820130172)
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