Mumbai, 6 Aug (Commoditiescontrol): Sugar futures posted back-to-back week of losses as the natural sweetener continue to feel the pressure of improved supplies from leading producers Brazil and India. Harvesting process have gathered pace in Brazil while sugar cane crushing activity has witnessed considerable growth, India, on the other hand, is expected to keep markets fairly supplied with the government unlikely to curtail exports amid adequate reserves required to meet local demand.
On Friday, India's Food Ministry pointed to country maintaining sufficient sugar stocks at 10.8 MMT as of July, which drove speculation that India may continue to supply sugar. As such, ICE Raw Sugar prices were knocked down below 24 cents mark.
ICE sugar futures for October delivery settled Friday's session down 0.33 cents, or 1.37%, at 23.69 cents per lb, having hit its lowest since mid-July at 23.57. The contract lost 1% in the week, after losing 4.4% last week. London October white sugar lost $12.80, or 1.83%, at $686.20 a ton.
Dealers pointed to limited news about supplies, but added that sugar is trying to consolidate at around 24 cents and that relatively high white sugar prices should encourage refiners to buy more raw for processing.
In terms of supply, they noted benign or improving weather conditions in Brazil, India, Thailand, China and even Europe for now, though that can always change quickly.
At the same time demand appears solid, the dealers said, pointing to strength in white sugar futures which they believe indicates raw futures are, on balance, likely to rise near term.
Institutional research unit of the Rabobank believed sugar would head lower from current elevated levels if the weather is more or less normal, because there are signs demand is tailing off. "In some markets, sugar price increases have started to be transferred to consumers. Furthermore, a major food producer recently announced an acceleration in its drive to reduce sugar content," it said.
Elsewhere, the EU crop monitor reduced its forecast earlier for the 2023 sugar beet yield to 73.3 tons a hectare from 75.9 tons, due to dry weather.
El Nino has so far led to patchy rains in key producers India and Thailand but top producer Brazil has been enjoying favorable weather that is expected to lead to strong, if not record, output. The intensity of El Niño could result in a 10 to 15% drop in global sugar production, analyst said.
Meanwhile, the demand appears solid as much of the consuming world is now concerned with the health aspects of artificial sweeteners and emerging economies are doing surprisingly well.
Rally in crude prices 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.
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 Aug. 1, data from the Commodity Futures Trading Commission showed on Friday. Funds cut 14,196 contracts from their net long position in raw sugar, taking it to 98,859 lots in the period.
After driving the prices higher in the past, the bull traders seems to have taken a breather. We can see prices consolidating in the near term.
For Monday, support for the July Sugar contract is at 23.47 cents and 23.25 cents, with resistance at 24.01 cents and 24.33 cents.
(By Commoditiescontrol Bureau: 09820130172)
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