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Weekly: Sugar Market Balances Between Bearish and Bullish Forces Amid Supply Uncertainty

13 Jan 2025 9:39 am
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MUMBAI, 13 Jan (Commoditiescontrol): Raw sugar prices on the Intercontinental Exchange (ICE) ended the week with mixed sentiments, as the USDA’s latest WASDE report and macroeconomic factors shaped market dynamics. On Friday, sugar prices recovered slightly, buoyed by a surge in crude oil prices that prompted short-covering. A rise in crude oil markets tends to support ethanol prices, which could encourage sugar mills to divert more sugarcane toward ethanol production, tightening sugar supplies.

The March raw sugar contract rose by 0.12 cents, or 0.6%, settling at 19.22 cents per pound after recovering from Thursday’s 3.5-month low of 18.84 cents. Despite this gain, the March contract recorded a weekly loss of 2.2%. London’s March white sugar futures also inched higher, gaining $1.90, or 0.4%, to close at $503.50 per metric ton.

The USDA’s January WASDE report brought a mix of signals to the global sugar market. U.S. sugar production is expected to reach a record high of 9.40 million short tons, bolstering domestic supply. Meanwhile, global sugar fundamentals remain complex, with contrasting production trends across key regions.

Brazil, the world’s largest sugar producer, reported a 5.1% year-on-year decline in sugar output from its Centre-South (CS) region by mid-December 2024, totaling 39.71 million metric tons (MMT). This decline was attributed to fewer operational mills, but favorable weather is expected to boost sugarcane processing for the upcoming season. Analysts project the CS region could process up to 620 million tons of sugarcane in 2024/25.

In India, sugar production plunged 15.5% year-on-year to 9.54 MMT between October and December 2024, according to the Indian Sugar and Bio-energy Manufacturers Association (ISMA). This steep drop has fueled speculation that India will maintain its export restrictions, which could tighten global sugar supplies further.

Conversely, Thailand and China are seeing notable production increases. Thailand’s sugar output is projected to rise by 18% year-on-year to 10.35 MMT for the 2024/25 season, while higher production in China may reduce its reliance on imports. Globally, the International Sugar Organization (ISO) revised its deficit forecast for the 2024/25 season to 2.51 MMT, down from 3.58 MMT, and increased its surplus estimate for 2023/24 to 1.31 MMT.

Weather conditions, ethanol demand, and macroeconomic factors such as currency movements and crude oil prices continue to drive market sentiment. The recent rally in crude oil has raised hopes of reduced sugar output as mills pivot toward ethanol. At the same time, stronger U.S. production and favorable weather in key regions like Brazil and Thailand provide bearish undertones.

From a technical perspective, raw sugar prices are expected to find support at 18.96 and 18.70 cents per pound, with resistance levels pegged at 19.48 and 19.74 cents. Analysts anticipate short-term volatility as the market digests mixed signals.

The global sugar market remains in a delicate balance. While production growth in regions like Thailand, China, and the U.S. signals improving supplies, declines in India and Brazil introduce significant uncertainty. Short-term price movements will likely hinge on weather developments, ethanol market dynamics, and export policies in key regions.

In the coming weeks, traders will keep a close watch on India’s export restrictions and Brazil’s weather conditions. With the broader economic environment also playing a role, the sugar market is expected to remain volatile, offering both risks and opportunities for market participants.

(By Commoditiescontrol Bureau; +91 98201 30172)


       
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