Mumbai, 26. Aug (Commoditiescontrol): Among agri-commodities, prices of Sugar continue to support bullish trend largely supported by the favourable fundamental factors. The natural sweetener witnessed a temporary set-back last week, but it resumed its upward once again during the week ended to Aug 25th. El Nino condition in major producing region of South East Asia, is causing dry spell in India, Thailand and other key countries which resulted in depleting ground water level and, in turn, denting sugarcane crop yielding and with that the sugar availability.
Leading trade organisations have already forecast bleak output scenario. Supplies are set to tighten in coming months while expectations of an Indian export ban has strengthen prices. As a result, ICE Raw Sugar prices ended higher on Friday. ICE sugar futures for October delivery settled up 0.54 cents, or 2.2%, at 24.83 cents per lb. October London white sugar settled $16.00, or 2.3%, higher at $709.40 a ton. ICE raw sugar futures added 4.50% while London white sugard settled 3.26% higher for the week.
During the week, the market was abuzz with talks of India imposing ban on mills from exporting sugar in the season beginning in October, halting shipments for the first time in seven years.
The market has been supported this week by news that India is expected to ban mills from exporting sugar in the season starting in October, halting shipments for the first time in seven years. Production in the key Centre-South region of Brazil, however, is running well above last season's pace.
Dealers said dry weather has cut cane yields and India is heading for its driest August in more than a century. The strong pace of harvesting in Brazil had contributed to the market's initial weakness.
Some traders see the long-term trend as positive on the prospect of possible problems to the Asian production due to the El Nino climate pattern, but the large Brazilian crop is preventing any rallies for now.
A survey issued by S&P Global Commodity Insights put sugar production in the key Centre-South region of Brazil during the first half of August at 3.54 million metric tons, up 34.4% from the same period a year earlier.
Drier conditions in some of India's major sugar-producing regions, including Maharashtra, are jeopardizing the upcoming sugar harvest, and potentially putting further strain on rising global food costs. Maharashtra, which accounts for a significant 37% of India's sugar output, is critically in need of rain to recharge the groundwater used for irrigation.
In recent times, the market derived support from 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. Although, the weather concerns in growing region has eased but stronger gasoline prices are supporting bullish case.
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 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.
Lack of demand from China remains a bearish influence on the market. China imported 110,000 metric tons of sugar in July, down 60.5% from the same month last year. The 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.
Earlier, a private research firm Conab 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.
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.
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 a brief spell of bearish trend, Sugar has once again moved in a bullish territory. Supportive fundamentals as well as favourable technical indicators are boosting price prospect.
For Monday, support for the October Sugar contract is at 24.32 cents and 23.82 cents, with resistance at 25.11 cents and 25.40 cents.
(By Commoditiescontrol Bureau: 09820130172)
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