Mumbai, 15 APR (Commoditiescontrol): It's been a fairly robust week for sugar markets amid lingering supply concerns. Raw sugar futures extended their rally to over $24.5 per pound in April, the highest since March 2012, amid rising concerns over global supplies. The prospects remains tied to availability of sweetener during the on-going festival season.
Although, the pick-up in Brazil's production helped lessen concerns about supply tightness, but ICE raw sugar future posted modest gain on Friday while hovering near 11-year high.
ICE May raw sugar settled up 0.06 cents or 0.25% at 24.10 cents per lb after peaking on Wednesday at 24.85 cents – the highest since April 2012. May London white sugar lost $7.20, or 1.04%, to $683.00 a tonne. London May settlement contract expired on Friday.
ICE sugar futures gained 2.08% for the week while London sugar added 1.5%.
Sugar output in India, the second largest producer, is estimated to fall to 33.5 million tonnes in the 2022-23 crop year from 34.5 million tonnes, according to All India Sugar Trade Association. As a result, the country may not approve additional sugar exports in the year ending September, India's food secretary recently said.
Also, production is expected to decrease in Thailand and China, as the latter cut its forecast to less than 9 million tons from 9.5 million tons. On the other hand, Brazil, the leading producer, is expected to produce 40.3 million tonnes of sugar in the season that just started, the second-highest amount on record. Still, elevated ethanol prices due to OPEC's surprise oil output cut encourage sugarcane producers to allocate crops to more profitable biofuel blending instead of sugar crushing.
Bullish factors....
Sugar enjoys the best fundamental settings among several commodities currently available on the futures markets. Sugar supplies have tightened by lower-than-expected 2022/23 crops in India, China and Thailand along with concern about the impact of an El Nino weather event on 2023/24 output in the major Asian producers.
Supportive factors for sugar included the earlier-than-normal closure of many sugar mills in India, rains in Brazil probably slowing sugar cane crushing, stronger Brazilian real, crude oil prices and concerting sugar cane for ethanol.
Fitch Solutions said, "Downgraded harvest expectations in Brazil, India and Europe are driving supply concerns, while prices are also being supported by the continued diversion of sugarcane towards ethanol production in India."
A slowdown in sugar output in India sparked fund buying of sugar futures. India's Oct-Mar sugar production fell 3.3% on year to 29.96 MMT, report by the Indian Sugar Mills Association (ISMA) showed. India is the world's second-largest sugar producer. Green Pool said increased sucrose diversion to ethanol, and less cane for crushing in western India have contributed to a drop in production.
Dealers said concerns that an El Nino weather event could reduce 2023/24 output in Asia where it can result in drier-than-normal weather, as well as worries regarding April rains in Brazil that could disrupt harvesting.
The market was now heavily dependent on supplies from top exporter Brazil whose late March sugarcane crush was large compared to the previous year, although below estimates.
The European Union expects a decline in production to lead to a rise in imports and a fall in the planted area for the 2023/24 season.
Dealers said the availability of white sugar to tender against the May contract appeared limited after lower-than-expected crops in several countries. Strength of the Brazilian real is also favorable for sugar prices. A stronger real discourages export selling from Brazil's sugar producers.
Bearish factors....
One of the key factor that could check sugar price rise is, the start of harvest in the Centre-South region of Brazil. The harvest progress could eventually provide some relief, dealers said, but there are worries among traders regarding the capacity of ports to deal with large crops of soybeans, sugar and corn.
An increase in Brazil's sugar output sparked long liquidation pressures in sugar futures after Unica reported that Brazil's 2022/23 sugar production from Oct through March rose 5.2% on year to 33.728 MMT.
Even as the StoneX Group has cut their 2022/23 global sugar surplus estimate to 2.5 MMT from a Jan forecast of 5 MMT, citing lower production in India due to excessive rain, but the prospect of increased availability may tame prices of the sweetener.
Meanwhile, the speculators have raised their bullish bets in futures of raw sugar on ICE U.S. in the week to April 11, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds added 3,592 contracts to their net long position in raw sugar, taking it to 155,146 lots in the period.
In the coming week the news flow from the Brazilian sugar can harvest will be single largest element determining the price movement.
For Monday, support for the May Sugar contract is at 23.19 cents and 22.91 cents, with resistance at 23.68 cents and 23.89 cents.
(By Commoditiescontrol Bureau: 09820130172)
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