Mumbai, 28 Jun (Commoditiescontrol): In a dramatic turn of events, sugar futures surged on ICE on Thursday, breaking out of a prolonged two-month trading range as market attention honed in on Brazil's sugar production forecasts and the imminent expiry of the July contract.
The July raw sugar contract skyrocketed by 0.88 cents, or 4.6%, closing at 20.12 cents per pound. Earlier in the trading session, prices peaked at 20.16 cents per pound, marking their highest level in nearly two months. Investors and traders alike closely monitored the contract, anticipating deliveries between 1.2 to 1.5 million tons ahead of its expiry later in the week. Across the Atlantic, the August ICE white sugar contract in London also experienced significant gains, rising by $15.90, or 2.8%, to settle at $585.10 per metric ton.
The surge in sugar prices followed adjustments in Brazil's sugar production estimates by several trading houses, prompted by disappointing data from the industry group UNICA. Analysts are eagerly awaiting UNICA's upcoming report, expected possibly on Friday, which will provide insights into Brazil's production figures for the first half of June. Concerns over lower-than-expected production levels prompted market participants to cover short positions, driving prices upward.
Earlier this week, sugar futures in both New York and London had shown resilience, achieving one-week and six-week highs respectively. Contributing to this bullish sentiment was India's decision to maintain restrictions on sugar exports, which provided stability in the global sugar market.
Weather conditions remained a critical factor influencing market dynamics. In Brazil, dry weather conditions have raised concerns about the health and yield potential of cane crops, crucial for sugar production. Meanwhile, India's monsoon progress, vital for the growth of sugarcane, continues to be closely monitored. A significant rainfall deficit in central regions of India has already impacted various crops, including sugarcane, contributing to a 1.6% year-over-year decline in sugar production as of April 30. The delayed onset of monsoon rains further adds to uncertainties surrounding planting schedules and crop yields.
Looking ahead, Czarnikow (CZ), a leading trader and supply chain services provider, has projected a global sugar surplus of 5.5 million metric tons for the 2024/25 season (October-September). This forecast reflects increased production in key sugar-producing regions worldwide. However, Copersucar, the world's largest sugar merchant, remains cautiously optimistic about mid-term sugar prices. They suggest that adverse weather conditions in Brazil could potentially reduce production for the upcoming season, underscoring the volatile nature of the sugar market.
The surge in sugar prices was also bolstered by speculative traders reducing their net short positions, contributing to a wave of short-covering that further lifted prices. Market participants are now closely monitoring technical support levels for the October sugar contract, with key support seen at 19.68 and 19.15 cents per pound, while resistance levels are anticipated at 20.54 and 20.87 cents per pound.
Overall, the sugar market remains volatile, with developments in Brazil and India's sugar sectors continuing to dictate market sentiment and price movements globally.
(By Commoditiescontrol Bureau: 09820130172)
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