Mumbai, 30 OCT (Commoditiescontrol): Sugar prices continues to slide lower, posting their second straight week of loss, as higher global output prospect takes its toll. Recent production estimates have placed global sugar availability at comfortable level. At one point in time, sugar end stock was pointing towards deficit condition. The situation has reversed since then, and we are sitting pretty with surplus availability.
That scenario have led sugar futures to continue with its downward spiral on Friday. Increase in liquidation pressure saw sugar extending their recent sell-off, with ICE raw sugar prices dropping to a 1-month low and London sugar falling to a 2-month low.
Dealers said the prospect of a global surplus in the current 2022/23 season continued to keep the market on the defensive, though short-term supplies remain tight.
ICE March raw sugar fell 0.73% to 17.58 cents per lb, its fresh three-week low. December London white sugar fell 0.31% to $515.60 a tonne. For the week, raw sugar is down 4.35% while white has lost 3.26%.
During the week, the sweetener prices were undercut by less supportive indicators that could help turn the tide in favour of bulls.
Bearish factors...
Leading from the front was Brazilian Brazilian real that consolidated just mildly above the 1-month low posted earlier in the week. The real saw weakness ahead of Sunday's presidential run-off election in Brazil. A weaker real encourages export sales by Brazilian producers.
Sugar prices remain under pressure from the prospects for increased sugar supply. The International Sugar Organization (ISO) late Tuesday projected global 2022/23 sugar production would climb 4.5% on year to 181.9 MMT, a 5-year high. Also, ISO projects the 2022/23 global sugar market to be in surplus by 5.6 MMT.
Higher sugar output in India is bearish for prices. The Indian Sugar Mills Association last Monday forecast India's 2022/23 sugar production (Oct 1-Sep 30) to climb 2% on year to 36.5 MMT as Indian farmers boosted their planted cane acreage by 5.4% on year to 5.6 mln hectares.
In 2021/22, India's sugar production rose 2.9% on year to 35.8 MMT. India is the world's second-largest sugar producer. Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped 57% on year to a record 11 MMT.
In a bearish factor, StoneX on September 18 projected that Brazil Center-South 2023/24 sugar production would climb 5.7% on year to 35.2 MMT. StoneX also projects that global 2023/24 sugar production would climb 3% on year to 194.4 MMT on rising supplies from Brazil, India, and Thailand. StoneX predicts a 2022/23 global sugar surplus of 3.9 MMT.
Bullish factors...
Signs of smaller sugar production in Brazil are supportive of prices. Unica reported Oct 11 that Center-South sugar output in the 2022/23 marketing year through September was down 9.9% on year to 26.334 MMT. Also, Conab, on August 19, cut its estimate for the 2022/23 Brazil sugar crop to 33.9 MMT from an April forecast of 40.3 MMT, citing lower plantings and falling sugar cane yields.
This past summer's hot and dry weather in Europe, the world's third-largest sugar producer, caused smaller sugar beet yields and lower sugar production, which is bullish for sugar prices. Czarnikow Group predicts sugar output in the European Union (EU) and the UK should total 16.4 MMT this year, about 1 MMT lower than last year, which means the EU may have to import more sugar than usual.
Another important factor is India's government has extended ban on sugar exports by another one-year. Earlier in May, India restricted exports to contain a rise in domestic prices following records exports.
India is expected to produce record sugar crop this year, which could allow New Delhi to allow exports of up to 8 million tonnes, the government and industry official said this month.
For Monday, support for March sugar contract is at 17.51 cents and 17.44 cents with resistance at 17.69 cents and 17.80 cents.
As long as output expectations stays favourable, it is difficult to expect sugar prices moving higher. However, the recent slide can offer bargain hunting opportunity.
(By Commoditiescontrol Bureau: +91-22-40015505)
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