Mumbai, 10 DEC (Commoditiescontrol): ICE raw sugar clocked second straight week of gains on supply concerns from Brazil - the top exporter, as the South American nation witnessed heavy rains. Crude oil regaining lost ground also came in handy for sweetener, as high energy prices boost ethanol demand.
On Friday, ICE raw sugar futures ended mixed as rains in Brazil force farmers to abandon cane harvest while hopes of China demand revival provide the leg. However, the slump in oil prices undercut the ethanol blending requirement.
The ICE March raw sugar settled down 0.08 cent, or 0.41%, at 19.60 cents per lb. The contract hit a two-week high earlier. For the week, it was up 0.62%. March London white sugar rose $0.80, or 0.15%, at $541.40 a tonne. It closed 1.60% higher for the week.
Gains were later capped by a rising dollar and falling oil prices.
Dealers cited that the market has been supported by rains in Brazil which is likely to result in millions of tonnes of cane being left in the fields to be harvested next year. Apparently, prices should consolidate at current levels with a bullish bias likely to result in a slow uptick, they said.
Oil prices slipped on Friday. Weak crude prices undercut ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
Bullish factor...
Most mills in Brazil's main centre-south sugarcane region are ending cane crushing for the season, leaving millions of tonnes of cane in the fields to be harvested next year, as rains make harvesting operations difficult and inefficient.
The Thai sugar harvest has meanwhile been delayed, dealers said, while prolonged rains in Brazil are expected to have hurt cane harvest progress.
Speculators increased their bullish bets in raw sugar, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds net long position in raw sugar rose to 118,701 lots after an addition of 3,622 in the period. A large long position by commodity funds of London white sugar futures could prompt long liquidation pressure.
Bearish factor...
While sugar supplies extended support for sugar to move higher, some negative cues were provided by production outlook.
StoneX boosted its global 2022/23 sugar surplus estimate last Thursday to 5.2 MMT from a Sep estimate of 3.9 MMT. StoneX also predicts Brazil's 2023/24 Center South sugar production will climb 5.2% on year to 35.6 MMT.
Increased sugar production in Brazil is bearish for prices after Unica reported Nov 25 that Brazil's Center-South sugar output in the 2022/23 marketing year through mid-November rose 0.3% on year to 31.966 MMT.
Also, the Organization of Cane Producers Association in Brazil forecast last Monday that Brazil's sugar output in 2022/23 at 36.9 million metric tons due to favorable weather and that production would reach 37.2 million metric tons in 2023/24.
Higher sugar output in India is bearish for prices. On Oct 24, the India Sugar Mills Association ISMA predicted that India's 2022/23 sugar production (Oct 1-Sep 30) would 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. 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. Last Friday, (ISMA) reported that India's Oct-Nov sugar production rose 1.5% on year to 4.79 MMT.
In a bearish factor, the International Sugar Organization (ISO) on Nov 22 projected that global 2022/23 sugar production would climb 5.5% on year to a record high of 182.1 MMT. Also, ISO projected that the 2022/23 global sugar market would be in a surplus of 6.2 MMT.
Sugar is caught between robust output forecast and a hostile weather condition. Given the year-end approaching close, the funds will be keeping tight vigil on their positional holdings for the next year. Currently, odds are in favour of bulls. Not to forget we are once agains advancing near 20 cents mark.
For Monday, support for March sugar contract is at 19.48 cents and 19.37 cents with resistance at 19.79 cents and 19.99 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)