Mumbai, 19. Aug (Commoditiescontrol): After a week of gain, raw sugar prices have once again returned to post week of loss. The prospect of bumper sugarcane crushing in Brazil has cause a shift in the price outlook. Speculators are no wasting time and have already increased their bets of price fall.
On Friday, ICE Raw Sugar prices extended fall, succumbing to bumper sugarcane crop in Brazil which has resulted in rising global supplies. Top producer Brazil increased its forecast for 2023/24 sugar and ethanol output on the back of a bumper sugarcane crop.
ICE sugar futures for October delivery settled down 0.24 cents, or 1%, at 23.76 cents per lb, after setting a three-week high of 24.74 cents on Thursday. The contract dropped 2.34% for the week.
London October white sugar lost $7.80, or 1.1%, at $687.00 a ton, after hitting $712.20 a tonne, highest since May 30. It ended 1.45% lower for the week.
A private research firm Conab, on Thursday, raised its Brazil 2023/24 sugar production estimate to 40.9 MMT from an April forecast of 38.8 MMT as favorable weather conditions boosted sugarcane yields.
Conab estimate has undercut the recent support that helped drive markets higher. The prospect of a global deficit in the 2023/24 season and concerns that dry weather linked to an El Nino weather event could curb production in key Asian producers such as Thailand, joined hands to push sugar above 25 cents mark last month.
The weather concerns in growing region, has since eased but stronger gasoline prices are supporting bullish case. Demand and supply conditions are now have turned favvourable for bearish outlook.
To begin with, the 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. The raw sugar demand, on the other hand, has fell 20% in the first half. However, the refiners are set to go back to buying to replenish stocks, Czarnikow said, which helps to put a floor on the market.
Also, the 16% gasoline price rise in Brazil is seen improving ethanol's profit margins, but the price comparison to sugar is still large in favour of the sweetener. Brazil's oil company Petrobras raised gasoline prices by 16%, which should improve ethanol's profit margins,
Elsewhere, Egypt's commodities exchange on Wednesday invited companies to register to trade sugar on the bourses, which already offers yellow corn and wheat.
The International Sugar Organization (ISO), last Thursday, forecast a global sugar deficit of 2.12 million metric tons in 2023/24 (October-September), its first estimate for the upcoming season. Production prospects are not as good elsewhere and analysts are expecting a global deficit. They bet near-record output from top producer Brazilian will not be enough to offset falling production elsewhere.
Meanwhile, 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.
Though, the Brazil production prospect and weak demand are the key concerns now, but we continue to hold positive view on the sugar. This was broadly based on the weather conditions which would determine global sugar availability. The forecast suggested global supplies may be stressed from the hot climate, which could ultimately lead to the strengthening of prices.
For Monday, support for the October Sugar contract is at 23.61 cents and 23.46 cents, with resistance at 23.97 cents and 24.18 cents.
(By Commoditiescontrol Bureau: 09820130172)
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