Mumbai, 18 DEC (Commoditiescontrol): ICE raw sugar futures have found new lease of life in dwindling supplies from leading countries, namely Brazil and India, while improved demand prospects ahead of Christmas Holiday's have collaborated with underlying fundamentals to turn the tide in favour of Bulls for now.
As a result, ICE raw sugar futures extended their recent gains on Friday, after hitting nearly six years high in the previous session, on the outlook for smaller sugar production from Thailand and India.
The ICE March raw sugar rose 0.11 cent, or 0.6%, at 20.09 cents per lb. It gained 2.5% in the week. March London white sugar settled up $1.80, or 0.3%, at $546.80 a tonne.
The front month ICE raw sugar contract had risen to a peak of 20.73 cents on Thursday, the highest level since February 2017.
Dealers said weaker energy prices capped gains on Friday, along with the possibility that India may allow additional sugar exports in January. Further, the prolonged rains in Brazil are expected to have hurt cane harvest progress.
Bullish factors....
Apart from supply concerns, the court decision related to ethanol in Brazil has also emerged as a supportive factor.
On Wednesday, StoneX Financial said that due to a delay in Thailand's sugar harvest, projections for Thai sugar exports of 1 MMT to 2 MMT this quarter "will not materialize."
Also, India's Sugar Mills Association (ISMA) said Wednesday it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.
Earlier, it was feared that mills in India are producing almost no raw sugar at the moment because whites are currently more lucrative, leaving the global market short at a time when top exporter Brazil is in between harvests.
Dealers added Indian refiners who sometimes buy raw locally are mostly importing them now from the world market, namely from Brazil.
The market is being boosted by near-term supply tightness and an overall reluctance by funds to liquidate their long positions.
A jump of more than +2% in crude oil prices Wednesday to a 1-week high supported sugar. Higher crude prices benefit ethanol and prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
France's farm ministry estimated sugar beet output fell 8.2% this year versus last.
On the downside however, there remains some pressure from data out on Monday showing top producer Brazil's sugar production in the second half of November was up six-fold versus a year ago, dealers said.
The market had been underpinned recently by short-term supply tightness, but that is set to ease.
A large long position by commodity funds of London white sugar futures could prompt long liquidation pressure. Speculators have increased their bullish bets in raw sugar futures, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Fund net long position in raw sugar rose to 127,409 lots after an addition of 8,707 contracts.
Last Friday's weekly Commitment of Trades (COT) report showed funds boosted their net-long London white sugar positions by 1,500 in the week ending Dec 6 to a 3-year high of 32,999 positions.
A supportive factor for sugar is smaller sugar production in Europe, which may force European sugar and food manufacturers to import sugar, leading to tighter global supplies.
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.
Bearish factors....
Increased sugar output in Brazil is bearish for sugar prices after Unica reported Monday that Brazil's Center-South sugar output in the 2022/23 marketing year through November rose 2.8% on year to 32.940 MMT.
Unica's crush numbers were much better than many were expecting. When the Dec/March crush is added, the final cane crush number could be heading towards 555 mln tonnes, dealers said.
India would consider allowing additional sugar exports under the quota system in January after assessing local production, Food Secretary Sanjeev Chopra said.
Meanwhile, Pakistan has lifted a ban on sugar exports, the finance ministry said, aiming to allow up to 100,000 tonnes of shipments in fiscal year 2022/23.
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.
The Organization of Cane Producers Association in Brazil last Monday forecast a 2022/23 sugar output 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 forecast a 2% on year increase in India's 2022/23 (Oct 1-Sep 30) sugar production 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.
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.
For Monday, support for March sugar contract is at 19.83 cents and 19.57 cents with resistance at 20.32 cents and 20.55 cents.
(By Commoditiescontrol Bureau: +91-22-40015505)
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