Mumbai, 8 JAN (Commoditiescontrol): Sugar witnessed a bitter start to the year 2023, by losing more than 5% during the first trading week of 2023, mostly due to improving production prospects in key countries and funds liquidating lofty long position.
The ICE March raw sugar settled down 0.38 cents, or 2.0%, at 18.96 cents per lb after setting a near two-month low of 18.94 cents.
The front-month contract lost 5.39% in the first week of trading in 2023. Sugar contract gained 6.1% last year supported by supply tightness that was expected to continue through the first quarter of 2023.
A week earlier, the contract hit the highest level for the front month since February 2017.
March London white sugar fell $7.50, or 1.4%, at $527.20 a tonne. The contract lost 4.9% in the week. White sugar prices posted an annual gain of 11.5%, also the fourth consecutive year of gains for the product, which accumulated a 54.8% price increase over that period.
Dealers said some funds were liquidating long positions, with production in India and Thailand exceeding some forecasts, while changes to the Brazilian government's fuel policy are set to encourage cane mills to favour sugar over ethanol.
According to the CFTC report, funds cut their net long position in raw sugar by 16,358 contracts to fell to 157,992 lots. Although, the speculator's long position in raw sugar has started to come down, but it is the largest in 12 months.
Bearish factors....
Weather played a key role in changing the sentiment. Early rains in South America are seen as a boon to sugarcane harvest.
Dealers noted good rains in top producer Brazil suggest a possible early start to the new harvest, with higher production widely expected. Also, the Brazilian government's fuel policy is set to prompt cane mills to favour sugar output over ethanol.
At the same time, production in India is progressing well and the Thailand harvest is off to a good start.
Traders also said that increased output of sugar in India was helping to keep the market on the defensive. Indian mills' sugar output in the first three months of the 2022/23 marketing year that started on Oct. 1 rose 3.7% from the same period a year earlier.
Earlier in the week, Sugar prices were undercut by Monday's -1.6% sell-off in the Brazilian real to a 1-1/2 month low against the dollar. A weaker real encourages export selling by Brazil's sugar producers.
Another bearish factor for sugar prices is an improved sugar supply outlook. Last Tuesday, Conab hiked its Brazil 2022/23 sugar production estimate to 36.4 MMT from an Aug estimate of 33.9 MMT. Also, the India Sugar Mills Association (ISMA) on Dec 19 reported that India's Oct-Dec 15 sugar production rose 5.4% on year to 8.21 MMT. India is the world's second-largest sugar exporter.
Higher sugar output in India is bearish for prices. On Oct 24, the 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.
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.
Bullish factors....
In a bullish factor, StoneX Financial said Dec 14 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 that it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.
Reduced sugar production in Europe is another supportive factor for prices, as that may force European sugar and food manufacturers to import sugar, leading to tighter global supplies. The European Association of Sugar Manufacturers on Dec 8 predicted that EU 2022/23 sugar output would fall 7% on year to 15.5 MMT.
2023 has begun on a somber note for the sugar market. It remains to be seen how much of an impact South American rain progress and oil prices will have. In addition, China's recent decision to lift their stringent Covid-19 lockdown rules and allow foreign tourists back in may create some optimism for the sweetener. Despite this, global recession fears still linger and could potentially be a hindrance.
For Monday, support for March sugar contract is at 18.81 cents and 18.65 cents with resistance at 19.25 cents and 19.53 cents.
(By Commoditiescontrol Bureau: 09820130172)
0 Comments 
Post Comment 
