Mumbai, 18 Jun (Commoditiescontrol): Sugar prices posted second consecutive week of gains led by increased speculation about the sweeteners availability amid delayed monsoon in south-east region due to El-Nino effect, weather forecast suggested. Although, the dollar index rebound checked gains.
ICE Raw Sugar prices posted moderate gains on Friday, drawing support from the stronger Brazilian Real and crude oil prices. Also, the producers showing less interest for price fixation below 26 cents helped prices to sustain gains.
The stronger the real discourages export selling from Brazil's sugar producers while higher oil prices benefit ethanol prices and may prompt the world's sugar mills to divert more sugarcane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
Not to forget, the El Nino weather pattern, which is likely to dent global production, helped push prices higher.
ICE sugar futures for July delivery settled higher 0.43 cent, or 1.7%, at 26.43 cents per lb. Last week, the contract hit a 6-1/2 week low of 24.23. London August white sugar futures rose to $17.50, or 2.6%, to $702.50 a tonne. ICE raW sugar added 4.1% this week while London sugar edged 3.1% higher.
Dealers said the sugar continues to derive strength from the strength of Brazil's real, currently sitting near 1-year high against the dollar, which discourages export selling from Brazil's sugar producers.
The sweetener, on technical front, remains on a strong footing given the previous session gains, in conjunction with the July 2023 option expiry, going into a long US week-end.
There are indications that sugar prices in the United States could start to fall from the elevated levels of the last three years, analysts said, although better weather is needed to avoid any problems with local production.
Brazilian sugar and ethanol industry group UNICA on Tuesday reported sugar production in the second half of May totalled 2.9 million metric tons, up 25.2% from the same period a year earlier.
Citi sees the Brazilian crop helping to improve availability, but raised its price forecast due to weather risks.
Meanwhile, in recent times the market has been supported by weather concerns, with an El Nino weather event likely to lead to drier than normal weather in major Asian producers such as India and Thailand which could curb production.
El Nino could also lead to wet weather in Centre-South Brazil, with the potential to disrupt the end of the cane harvest.
Monsoon rains finally reached India, the world's second largest sugar producer, on Thursday, marking their latest arrival in seven years and potentially delaying sugar planting. There is a forecast for rains in Brazil's main sugar region, which could disrupt the sugarcane harvest.
India is not considering allowing sugar exports until at least the first half of the next season, government sources said on Monday.
Indonesia, one of the world's top sugar importers, said it wants to raise white sugar output to 2.6 million tonnes this year, and expects imports to fall below 1 million tonnes.
The natural sweetener garnered support from last Thursday's bi-annual report of the USDA that projected a fall in global sugar ending stocks for 2023/24 to a 5-year low. As per the report, the global sugar production is likely to climb 6.0% on year to a record 187.881 MMT and sugar consumption is likely to increase 2.3% on year to a record 180.045 MMT. The agency is also forecasting a 15.2%, on year, fall in 2023/24 global sugar ending stocks to 5-year low of 33.455 MMT.
Sugar prices have been on a roll since last month after the prospect of tight supplies emerged.
In May, sugar prices rallied to 11-year highs on the outlook for tighter global supplies. On Apr 26, the Indian Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 32.8 MMT from a Jan estimate of 34 MMT.
Traders buying interest makes a strong bullish case for the commodity. As per the latest, Commitment of Traders report, funds added 11,998 contracts of their net long position in raw sugar, taking it to 147,000 lots in the period, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.
Clearly, the speculators continue to stay on a buying mode. The helped push the market up along with buying from sugar consumers, amid low interest from producers to make any price fixations
As usual, we maintain 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. However, for now, the Brazilian sugar harvest is undercutting the price forecast.
Monday is a federal holiday, thus all banks and markets are closed.
For Tuesday, support for the July Sugar contract is at 25.77 cents and 25.44 cents, with resistance at 26.28 cents and 26.46 cents.
(By Commoditiescontrol Bureau: 09820130172)
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