Mumbai, 25 Jun (Commoditiescontrol): For the week-end Jun 23rd, Sugar prices snapped their two straight week of gains as recent price surge offered opportunity to take same profit home while broader market weakness and illusive global demand, which has dampened investor sentiment. From, the U.S. to Euro zone, Japan, etc., the Central Banks across the globe are facing the challenge of taming the inflation without causing a destruction to economic growth prospect. But, that objective remains highly evasive for now.
Agri-Commodities are experiencing a peculiar situation where demand/supply factors are largely determined by weather conditions, which currently remains hazy.
Sugar was most influenced commodity due to weather uncertainty, till recent. However, on Friday, ICE Raw Sugar prices ended lower as speculators raised liquidation of their long positions over positive harvest news in Brazil. Weak demand from China is also to blame.
ICE sugar futures for July delivery settled down 0.75 cent, or 3%, at 24.18 cents per lb, having hit a two month trough of 24.13. The contract lost 8.5% in the week.
London August white sugar futures dropped $16.60 or 2.5% to $657.30 a tonne. It lost 6.4% in the week.
Dealers said speculators are liquidating some of their large long positions as the July contract's month-end expiry looms. No rains are forecast in the largest sugar belt in top producer Brazil until at least July 5, meaning the harvest should progress well.
Further, the weakness in sugar demand from China, the world's largest sugar importer, weighed on prices after China's Customs General Administration reported that China's May sugar imports sank 87% on year to 40,000 MT.
The ongoing sugar harvest in Brazil is a negative factor for sugar prices. Last Tuesday, Unica reported Brazil's 2023/24 sugar production through May was up 37.7% on year at 6.972 MMT and that the percentage of sugarcane crushed for sugar rose to 46.88% from 40.5% last year.
On Apr 26, Conab forecast Brazil's 2023/24 sugar output to climb 4.7% on year to 38.8 MMT, the second most ever, as crops recover from the previous season's adverse weather.
Meanwhile, Brazilian sugar and ethanol giant Copersucar achieved its second-largest net profit in 2022/23 as trading unit Alvean claimed 29% of global sugar sales in the cycle.
Elsewhere, India's stalled monsoon is likely to gain momentum in the next three to four days and could cover rice, soybean, cotton and sugar cane growing regions in the southern, central and western states. Egypt's strategic reserves of sugar are sufficient for six months.
In meantime, the natural sweetener 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 technicla front, remains on a strong footing given the previous session gains, in conjunction with the July 2023 option expiry, going into 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.
In recent times the market was 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.
Traders buying interest makes a strong bullish case for the commodity. As per the latest, Commitment of Traders report, funds added 11,258 contracts of their net long position in raw sugar, taking it to 158,258 lots in the period, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.
We continue to maintain out positive outlook on the sugar prices, which is broadly based on the weather conditions. The global sugar supply largely depends on weather patterns. The latest 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 are undercutting the price forecast.
For Monday, support for the July Sugar contract is at 23.97 cents and 23.66 cents, with resistance at 24.79 cents and 25.30 cents.
(By Commoditiescontrol Bureau: 09820130172)
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