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Sugar Futures Hold Weekly Gains Despite Friday Pullback Amid Global Supply Concerns

30 Sep 2024 9:23 am
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Mumbai, 30 Sep (Commoditiescontrol): Raw sugar futures on ICE experienced a pullback on Friday, retreating from their seven-month highs but still managing to post weekly gains, primarily driven by ongoing concerns over Brazil's drought conditions. Earlier in the week, prices surged to their highest levels since early 2023, before softening as India’s sugar industry pushed for export approvals. India, the world’s largest sugar producer, is expected to have around 2 million metric tons (MMT) available for export in the upcoming season, which tempered market sentiment.

On Friday, October raw sugar futures slipped by 0.52 cents, or 2.2%, to close at 22.79 cents per pound, after peaking at 23.57 cents earlier in the week. Similarly, London’s December white sugar futures fell by $17.70, or 2.98%, settling at $576.20 per ton.

Market participants indicated that the price surge earlier in the week prompted producers to sell, capitalizing on the rally. Additionally, expectations that India may export around 2 MMT of sugar in the next season contributed to the price drop.

Despite this retreat, sugar prices are still trending upward overall. Brazil, the world’s top sugar producer, faces severe drought and wildfires that could reduce sugar production by 2 million tons, down to 39 million tons in the 2024/25 season, according to BMI. StoneX projects Brazil will produce 40.6 million tons of sugar next season, a 2.5% increase, though cane crushing is expected to decline by 3.2% due to adverse weather. Russia is also projected to produce 10% less sugar in the next season due to weather challenges but could still export at least 600,000 tons following the lifting of its export ban.

Speculative traders have shifted towards bullish positions on raw sugar futures, with the Commodity Futures Trading Commission (CFTC) reporting that funds added 36,182 lots to their long positions, resulting in a net total of 31,933 contracts.

Brazil’s sugarcane yields have fallen by 7.4% through August, with wildfires destroying around 80,000 hectares of cane fields. This has led to a 6% decline in Brazil’s total sugar production, which stood at 3.26 MMT by the end of August. Some mills have shifted focus to ethanol production, further tightening global sugar supply.

In Europe, sugar markets showed mixed results, with France’s Cristal Union expecting stable sugar beet yields, while Germany’s Suedzucker revised its earnings forecast downward. Meanwhile, India’s strong monsoon rains could lead to higher sugar production, potentially exerting downward pressure on global prices. However, potential export restrictions from India and Brazil’s ongoing production challenges may keep prices elevated.

As the October contract approaches expiration on September 30, traders are closely watching key technical levels, with support at 22.33 and 22.03 cents per pound and resistance at 23.02 and 23.41 cents. Volatility is expected to remain high due to weather uncertainties and global supply disruptions.

While global factors such as Brazil's drought and India's possible export restrictions continue to support sugar prices, weak demand and production fluctuations present a mixed outlook. Traders will be keeping a close eye on weather patterns and geopolitical developments in the coming weeks to gauge the market's direction.

(By Commoditiescontrol Bureau: 09820130172)


       
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