Mumbai, 1 Jul (Commoditiescontrol): Sugar futures maintained downward spiral, posting a weekly loss above 5% partly due to strong production in Brazil and pick-up in monsoon in India amid higher fair price bolstering crop prospect. Sugar prices' recent rally was led by crop failure prospects in major producing regions, but that fears have ebbed lately forcing traders to liquidate their long position.
However, ICE Raw Sugar prices snapped a recent streak of losses and closed Friday's session higher, off three-month low, as the July contract expired with a modest delivery. However, weak demand outlook, strong Brazil harvest prospect as well as likely increase in supplies from India saw the natural sweetener clocking a 5.3% weekly loss. Meanwhile, speculators continued to liquidate their long positions.
ICE sugar futures for July delivery settled up 0.82 cent, or 3.7%, at 22.89 cents per lb. On Thursday, it had set a near three-month low of 21.81 cents. The contract still fetched a 5.3% weekly loss ahead of its expiry with a modest delivery of around 412,000 metric tons.
French sugar trader Sucden was said to be the largest deliverer of the sugar with 4,688 lots, or around 238,000 metric tons. Singapore trader Wilmar was said to be the largest receiver of the sugar, with more than 4,300 lots. ICE will release official data on the expiry on Monday.
London August white sugar futures rose $12.80 or 2.1% to $633.40 a tonne, having hit its lowest since late March at $614.50. It lost 3.6% this week.
The strength of the Brazilian harvest has begun to weigh on prices as data shows a sharp upturn in average yields in the world’s top producer, analysts reported. Brazil's sugar cane crushing for the 2023/24 season is expected to increase to 606.5 million metric tons from 598.50 million metric tons previously estimated, consultancy Datagro said on Thursday, as the cane fields are favoured by steady rainfall.
The price trend of sugar has experienced significant movements based on several fundamental factors. The Indian Sugar Mills Association (ISMA) cut its projection for India's sugar production to 32.7 million metric tons (MMT) for the CY22/23, compared to the previous year's output of 35.76 MMT.
The International Sugar Organization (ISO) sharply reduced its previous global supply estimate of a 4.15 million-tonne surplus to just 850,000 tonnes for the 2022/23 season.
India's cabinet on Wednesday approved an increase in the floor price that sugar mills must pay for cane next season - a move that could encourage farmers to plant more while prompting the government to allow overseas shipments.
Dealers said the steep market fall over the past week is due mainly to a change in sentiment that has prompted funds to liquidate their long positions, adding the funds likely have more to do near term.
Meanwhile, speculators are liquidating some of their large long positions as the July contract's month-end expiry looms.
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.
One of the world's most common artificial sweeteners is set to be declared a possible carcinogen next month by a leading global health body, according to two sources with knowledge of the process, pitting it against the food industry and regulators.
Elsewhere, 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.
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.
Speculators sharply reduced their bullish bets in futures of raw sugar on ICE U.S. in the week to June 27, while switching from long to short in arabica coffee, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds cut 45,309 contracts from their net long position in raw sugar, taking it to 112,950 lots in the period. Speculators' position in arabica coffee changed from long to a net short of 3,939 lots. They increased their net long position in cocoa futures by 4,411 lots to 46,358.
We have been maintaining a positive view on the sugar for sometime now. This was broadly based on the weather conditions which would determine global sugar. The forecast suggested global supplies may be stressed from the hot climate, which could ultimately lead to the strengthening of prices. However, for now, the weather conditions are turning favourable for crop. Also, the Brazilian sugar harvest is undercutting the price forecast.
For Monday, support for the July Sugar contract is at 22.28 cents and 21.76 cents, with resistance at 23.20 cents and 23.60 cents.
(By Commoditiescontrol Bureau: 09820130172)
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