Mumbai, 20 May (Commoditiescontrol): Sugar prices have extended recent weekly decline even as unfavourable weather condition are expected to hurt sugarcane production. The consolidation phase experienced during the week is keeping traders fairly active.
That helped the ICE Sugar futures to settle higher on Friday. Weakness of dollar sparked short-covering in futures. However, sugar prices fell back from their best levels after the Brazilian real fell to a 1-1/2 week low against the dollar. The weaker Real encourages export selling from Brazil's sugar producers. Last month, sugar price climbed tp 11-year highs.
On Friday, ICE July raw sugar settled up 0.17 cents, or 0.66%, at 25.78 cents per lb. London August white sugar added $3.40 or 0.48% to $710.00 a tonne. For the week, ICE July raw sugar lost 1.68% while London white sugar eased 0.32%
In recent times, the pick up in Brazilian sugar harvest emerged as a major factor to restrict prices. Forecasts for dry conditions in Brazil is likely to speed up the pace of the sugar harvest. The expectation sparked long liquidation in sugar futures.
Rural Clima Meteorlogia said little rain is expected in Brazil through the end of the month. Also, a proposal from the U.S. Department of Agriculture to limit sugar intake in children is bearish for prices as it could prompt food producers to use less sugar.
Another bearish for the market is the USDA proposal to limit the amounts of sugar used in flavored milk served in K-8 elementary schools and requiring those available to high schoolers to reduce their added sugar content.
Prices are poised for some wild moves as weather forecast in the growing region remains anything but conducive.
Dealers said concerns that El Nino could curb production in major Asian producers such as India and Thailand remained among supportive factors. They noted the development of India's monsoon season, which gets underway next month, would be closely watched.
Meanwhile, the market was underpinned by falling output in the European Union with planted area in France declining although a marginal rise is expected in Germany.
Citi expects this quarter to see the price peak as a bumper 2023/24 crop from top producer Brazil becomes available. Overall, Citi sees prices averaging 22.90 cents this year, as the market stays in deficit for 2022/23 and likely 2023/24.
A faster pace of the Brazil sugar harvest is bearish for prices. Unica reported last Thursday that Brazil's 2023/24 sugar production through April was up 43.7% on year at 1.531 MMT. Also, the percentage of sugarcane crushed for sugar rose to 41.6% from 35.3% last year.
As per the U.S. Climate Prediction Center forecast, there is likelihood of an El Nino weather pattern emerging between August and October. The prediction now suggests of 94% possibility as compared to last month's 75%.
If El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting sugar crop production. The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.
The outlook for a sugar surplus this year is negative for sugar prices. The International Sugar Organization (ISO) said last Thursday that it expects the global 2023/24 sugar surplus to fall to 2.1 MMT from a 4.15 MMT surplus in 2022/23.
ISO is projecting that global 2022/23 sugar production will climb 4.8% on year to a record high of 180.4 MMT. Larger sugar production is expected after Conab on Apr 26 forecast that Brazil's 2023/24 sugar output would climb 4.7% on year to 38.8 MMT, the second most ever, as crops recover from the previous season's adverse weather.
Elsewhere, China's Ministry of Agriculture halved its forecast for the country's sugar market deficit in 2023/24 from its previous estimate. Sugar production in the United States is expected to fall slightly in 2023/24 as beet sugar output is seen smaller.
Meanwhile, funds cut only 520 contracts of their net long position in raw sugar for a still large total of 164,115 lots in the period, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.
We have maintained in our previous reports about the possible continuation of uptrend in sugar price given the global supply uncertainty amid changing weather patterns. The latest weather forecast suggests that global supplies may be stressed from the hot climate, which could ultimately lead to the strengthening of prices.
For Monday, support for the July Sugar contract is at 25.55 cents and 25.32 cents, with resistance at 26.05 cents and 26.32 cents.
(By Commoditiescontrol Bureau: 09820130172)
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