Mumbai, 22 Jul (Commoditiescontrol): Bullish conditions observed in the past couple of weeks, are continuing to fuel sugar prices. Delayed rains in Asian countries such as India, Thialand, and rising crude oil prices prompting sugarcane diversion for ethanol adding to supply tightness.
On Friday, ICE Raw Sugar prices settled higher, while posting yet another week of gain. Natural sweetener benefited from firm crude oil prices and strength of Brazilian Real.
Also, the concerns of negative impact on yields from the El Nino weather phenomenon is expected dent supplies continue to support prices.
ICE sugar futures for October delivery settled up 0.34 cent, or 1.4%, at 25.01 cents per lb. The contract gained 2.8% this week.
London October white sugar futures rose $12.70, or 1.8%, at $701.60 a ton, and was flat for the week.
Though, sugar market was underpinned by concerns that El Nino could curb production in India and Thailand, but favourable harvest progress in Brazil was keeping a lid on prices.
Brazil has been enjoying favorable weather and is likely to boost sugar production, if not record, output. The intensity of El Niño could result in a 10 to 15% drop in global sugar production, analyst said.
On the demand front, the consumption levels are likely to remain high as much of the world is now concerned with the health aspects of artificial sweeteners and emerging economies are doing surprisingly well.
Yet another booster to sugar is due to rally in crude prices. This proves beneficial for the natural sweetener as it lifts ethanol prices and likely to prompt global sugar mills to divert more cane crushing toward ethanol rather than sugar production, thus limiting sugar supplies.
On the negative side, favourable weather in Brazil was boosting cane harvest progress in the key Centre-South region. Though, the details are still awaited. Industry group Unica is expected to provide an update next week on sugar production in the Centre-South region of Brazil covering the first half of July.
Last month, Brazil's center-south sugar production rose 7.6% in the second half of June when compared with a year earlier to 2.7 million metric tons, industry group UNICA said. Yet, the data was below market expectations for 2.88 million tons production, with sugarcane crush also less than expected.
The improving weather conditions in Brazil have also prompted sugar trader Czarnikow to raise its 2023 Center-South sugar production forecast by 500,000 MT to 38.2 MMT. Relatively high prices have prompted mills in Brazil to favour using cane to produce sugar rather than biofuel ethanol.
A proposal to increase Brazil ethanol blending in gasoline to 30% from 27% currently would lead to using an additional 3.5% of the country's recoverable sugar to make ethanol, a study showed.
However, Brazilian mills hedged around 4.5 million tonnes of next season's (2024/25) sugar exports on ICE by June 30, Archer Consulting said.
Egypt's General Authority for Supply Commodities has announced a tender to import 50,000 tonnes of raw sugar from any origin.
Dealers said lower-than-expected production in Brazil was helping to underpin the market. There was also talk about poor conditions for the Thai crop. Going forward the prices are likely to trend lower, they added.
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 continue to hold positive view on the sugar. This was broadly based on the weather conditions which would determine global sugar output. 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 24.53 cents and 24.06 cents, with resistance at 25.29 cents and 25.58 cents.
(By Commoditiescontrol Bureau: 09820130172)
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