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Weekly: Sugar Prices Extend Weekly Gains Amid Brazil's Crop Concerns, Strong Dollar Limits Upside

7 Oct 2024 9:09 am
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Mumbai, 7 Oct (Commoditiescontrol): Sugar prices continued to post weekly gains, primarily fueled by concerns over Brazil's crop outlook due to dry weather conditions. However, the positive momentum was slightly dampened by the bright prospects for India's sugarcane output. Despite a drop in raw sugar futures on Friday, driven by a strengthening U.S. dollar, sugar still managed to record a modest gain for the week.

March raw sugar futures declined by 0.23 cents, or 0.99%, to settle at 23.01 cents per pound on Friday. However, the contract achieved a weekly gain of 0.9%. London’s December white sugar futures also dropped by $7.10, or 1.22%, closing at $576.90 per ton. The sharp rise in the U.S. dollar to a seven-week high prompted traders to liquidate long positions, pushing sugar prices lower. The increased cost for non-U.S. buyers, exacerbated by a large long position in London white sugar, added further pressure on prices.

The latest Commitment of Traders (COT) report indicated that funds boosted their net-long positions in London white sugar by 4,460 contracts, reaching a four-year high of 40,192 contracts as of October 1. This elevated exposure could lead to further profit-taking if the market weakens.

Global sugar prices rose throughout September, contributing to the largest increase in the United Nations’ world food price index in 18 months. Brazil, the world’s largest sugar exporter, saw its sugar exports climb 23% year-on-year to 3.95 million tons during the month. In addition, escalating tensions in the Middle East have pushed oil prices higher, supporting ethanol production and encouraging global mills to divert more cane to ethanol rather than sugar, potentially reducing sugar supplies.

In India, above-average rainfall is forecast for October, which could affect sugar production levels. The country is expected to have around 2 million metric tons available for export in the upcoming season. Meanwhile, Brazil's sugar production is forecast to increase by 2.5% next season, according to StoneX, though adverse weather could still impact cane crushing. Russia, facing a 10% drop in sugar production due to poor weather, plans to export 600,000 tons after lifting its export ban.

Looking ahead, traders are watching key technical levels for sugar, with support at 22.68 and 22.34 cents per pound, while resistance is seen at 23.78 and 24.12 cents per pound. Market volatility is expected in the coming weeks, driven by weather conditions and geopolitical factors.

While sugar prices continue to rise, concerns about global weather patterns and fluctuating market dynamics may keep gains in check. The outlook remains uncertain as traders closely monitor crop conditions in Brazil, weather developments in India, and potential geopolitical tensions that could further impact the sugar market.

(By Commoditiescontrol Bureau: 09820130172)


       
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