Mumbai, 12. Aug (Commoditiescontrol): Sugar prices have rebounded this week to settle on a positive note, climbing to their weekly highs, led by sluggish global output which may result in sugar markets falling in deficit. El Nino weather patterns across the major producing region are currently driving the expectation of poor crops, particularly in the Asian region.
The projection was provided by none other than the International Sugar Organization (ISO), which sees a decline in 2023/24 global sugar production and the global sugar market to fall into a deficit.
The ISO Thursday projected 2023/24 global sugar production at 174.8 MMT, down 1.2% on year, while it expects the global sugar market to fall into deficit by 2.12 MMT in 2023/24 from a surplus of 852,000 MT during 2022/23 global.
The projection sent ICE Raw Sugar prices climbing to one-week high on Friday.
ICE sugar futures for October delivery settled up 0.38 cents, or 1.6%, at 24.33 cents per lb. London October white sugar rose $6.10, or 0.9%, at $697.10 a ton. For the week, ICE Sugar added 2.7% while London white sugar added 1.6%.
ISO report helped to set-in bullish momentum in the natural sweetener prices. Further, firm crude oil prices boosted investor sentiment while undermining record sugar production in top grower Brazil.
WTI crude rallied near a 9 month high Friday, which benefits ethanol prices, and is likely to prompt the world's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
Dealers said the market is in consolidation around the historically high levels. Raw sugar is seen ending the year around current levels but marking a sharp increase over end-December 2022 as the global market looks set to record a second year of supply deficits.
On the demand front there are some concerns, which were highlighted by the Czarnikow report. Raw sugar demand fell 20% in the first half, but refiners are set to go back to buying to replenish stocks, Czarnikow said, which helps to put a floor on the market.
Czarnikow projected Thailand 2023/24 sugar production would drop -31% on year to a 17-year low of 7.4 MMT due to dry weather. So far this year, rainfall in Thailand is well 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. Thailand is the world's third-largest sugar producer.
In other news, a Singapore-listed agribusiness Wilmar reported a 50% slump in its first-half core net profit due to slowing Chinese sales.
Meanwhile, top producer Brazil's center-south sugar production rose 11.3% in the second half of July versus a year ago, totalling 3.68 million metric tons, data from industry group UNICA showed.
Production prospects are not as good elsewhere and analysts are expecting a global deficit. They bet near-record output from top producer Brazil will not be enough to offset falling production elsewhere.
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.
The market looks weak and could fall further. While end users have more to buy, they appear to be in no hurry as the Brazilian harvest continues apace. Demand from China, too, remains unsupportive amid bleak macroeconomic scenarios. China's July imports fell 12.4% on year, the biggest decline in 6 months. Ample supplies from India is another aspect that can keep prices checked. Sugar prices are likely to stay in a consolidation phase before making any big move. For now, bulls appear to have the upper hand, but things can change quickly.
For Monday, support for the July Sugar contract is at 23.89 cents and 23.46 cents, with resistance at 24.59 cents and 24.86 cents.
(By Commoditiescontrol Bureau: 09820130172)
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