Mumbai, 14 Oct (Commoditiescontrol): After a prolonged decline, sugar futures saw a slight recovery on Friday, driven by growing concerns that the La Niña weather phenomenon could disrupt production in Brazil, the world's top sugar producer. Brazil’s sugar output has been under pressure due to a combination of natural challenges, including dry weather and crop fires, worsening the country's production outlook.
Unica, Brazil’s sugarcane industry group, reported that sugar production in the Center-South region dropped by 16.2% year-on-year to 2.829 million metric tons (MMT) during the second half of September. This drop added fuel to the rally in prices.
March raw sugar futures gained 0.08 cents, or 0.36%, settling at 22.24 cents per pound, though they still posted a weekly loss of 3.3%. In London, December white sugar futures rose by $2.10, or 0.5%, to close at $569.70 per ton.
The U.S. government forecaster stated a 60% chance of La Niña conditions developing between September and November, with a high probability of persistence through January to March 2025. La Niña could lead to drier conditions in Brazil, exacerbating the already low soil moisture levels caused by this year’s drought. Rabobank recently cut Brazil's 2024/25 sugar production forecast from 40.3 MMT to 39.3 MMT, citing the ongoing dryness.
The Brazilian government's crop agency Conab also lowered its 2024/25 Center-South sugar production estimate to 42 MMT, down from a previous 42.7 MMT, due to drought and excessive heat that have affected sugarcane yields.
Meanwhile, the USDA projected a record sugar production for the U.S., further adding to the mixed global outlook. In India, favorable monsoon rains—7.6% above the long-term average—are expected to result in a bumper sugar crop, which could weigh on global prices. However, Brazil’s sugar exports surged 23% in September to 3.95 MMT, contributing to the rise in the UN's global food price index.
Elsewhere, Indonesia is considering levies on sugar imports to fund its bioethanol program, while Germany is set to increase its refined sugar production by 17% this season. Conversely, Russia faces a 10% drop in sugar production due to poor weather conditions, though it still plans to export 600,000 tons after lifting its export ban.
From a technical perspective, traders are monitoring key support levels for sugar futures at 21.87 and 21.51 cents per pound, with resistance expected at 22.64 and 23.05 cents per pound. Speculative funds have also increased their net-long positions in London white sugar, reaching a four-year high, which could intensify liquidation pressures if prices dip.
Despite the temporary relief in prices, sugar markets remain volatile. Brazil's production remains under stress, and La Niña could bring more uncertainty. With forecasts of rain in Brazil’s key sugar-producing regions, the market may see fluctuations in the coming weeks as traders keep an eye on weather patterns, global supply-demand dynamics, and potential export opportunities from major producers like India and Brazil.
(By Commoditiescontrol Bureau: 09820130172)
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