Mumbai, 8 Jul (Commoditiescontrol): The comeback trail staged by Sugar a week-ago, continued unabated during the truncated week to July 7th. Supply pressures have been building in price rise, as observed during the past few days, and are playing out as expected, only to persist for some more time. Meanwhile, speculators continued to liquidate their long positions.
Gains in sugar prices are primarily, led by increased speculation about the sweeteners availability amid delayed monsoon in the south-east region due to El-Nino effect, weather forecast suggested.
On Friday, ICE Raw Sugar prices closed marginally higher, as a slide in U.S. dollar and excessive dry weather conditions in Thailand, the world's third-largest sugar producer, joined hands to lend support. The U.S. said on Friday that it will increase the low-tariff import quota for raw cane sugar by 125,000 metric tons, raising the prospect for more demand.
ICE sugar futures for October delivery settled up 0.28 cent, or 1.2%, at 23.53 cents per lb. The contract rose 2.8% in the week, regaining ground after a 6.2% slide in the previous week. Last week, the contract set a near three-month low of 21.81 cents. London August white sugar futures rose $8.80 or 1.3% to $666.10 a tonne. It gained 5.16% in the week.
Going forward the prices are likely to trend lower. The continued good progress with the cane harvest in Brazil could limit the scope of the recovery in prices, dealers said.
Recent research reports have been pointing to weather conditions as a key factor while predicting price outlook.
Broker Czarnikow revised upwards its forecast for Brazil sugar production to 38.2 million metric tons, citing good agricultural yields and quick harvesting pace. That's negative for prices.
Czarnikow Group forecast a fall in Thai sugar production this year for the first time in three years, and may drop to the second lowest since 2009/10. That prediction was based on rainfall in Thailand this year, which is 28% below the same period last year, and the onset of the El Nino weather system could lower precipitation even further over the next two years.
Suedzucker said it expects the European Union (EU) to remain a net sugar importer this year, with global prices expected to remain high. Given this "continued positive market environment", Suedzucker said it expects to achieve continued high sugar prices in the EU.
However, EU's sugar output is seen rebounding more than 6% in 2023/24 from the previous year to 15.5 million tons, but ending stocks will remain tight due to lower imports and a rise in exports.
Meanwhile, 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. 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.
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.
In other news, 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 reduced their bullish bets in futures of raw sugar on ICE U.S. in the week to July 3, data from the Commodity Futures Trading Commission (CFTC) showed on Friday. Funds cut 23,171 contracts from their net long position in raw sugar, taking it to 89,779 lots in the period.
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 crops. Also, the Brazilian sugar harvest is undercutting the price forecast.
The Sugar market was seeking a new level and may try to consolidate around 23 cents, in a more volatile trading as volumes drop.
For Monday, support for the July Sugar contract is at 23.15 cents and 22.77 cents, with resistance at 23.87 cents and 24.21 cents.
(By Commoditiescontrol Bureau: 09820130172)
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