Sugar hits 1 month high on fund buying, diminishing production outlook
By Onome Amuge
Raw sugar futures traded higher on the Intercontinental Exchange (ICE), reaching a one-month peak and just a little below the 6-year high reached late in December 2022.
March raw sugar was up 0.28 cents or 1.4 per cent at 20.96 cents per lb, having hit a one-month high of 21.03 cents in an earlier session. The contract had a weekly gain of 6.3 per cent.
March white sugar also gained, rising $7.40 or 1.3 per cent, at $562.40 a tonne. It climbed 2.9 per cent in the week
Market dealers noted that the recent run-up in prices has been driven partly by a fund buying, along with a decreasing outlook for sugar output in India’s top producing state Maharashtra, which could curb exports from the world’s second-largest exporter.
Reports show that sugar mills in Maharashtra are set to stop cane crushing 45 to 60 days earlier than last year as adverse weather has curtailed sugar cane availability.
According to Shekhar Gaikwad,sugar commissioner, Maharashtra State, the western state of Maharashtra, which accounts for more than a third of the country’s sugar output, could produce 12.8 million tonnes of sugar in the 2022/23 marketing year that began on Oct. 1, down from an earlier forecast of 13.8 million tonnes,
There are also indications that lower sugar output could prevent the world’s second-biggest exporter from allowing additional exports, potentially supporting global prices and allowing rivals Brazil and Thailand to increase their shipments.
Analysis on the sweet commodity also showed that changes in Brazil’s fuel policy could boost production of ethanol at the expense of sugar in the world’s leading producer.
Similarly, coffee futures traded in green as March arabica coffee advanced 2.75 cents or 1.6 per cent to $1.699 per pound after setting a three-week high of $1.7030. The contract also recorded a robust 9.7 per cent gain in the week.
March robusta coffee climbed $59 or 3.0 per cent to $2,053 a tonne, having hit a three-month peak at $2,057/tonne.
Dealers explained that the market had regained ground after hitting a 1-1/2-year low of $1.4205 on Jan. 11, but concerns remain over the demand outlook.
Fitch Solutions, in a note, said it expects a weak global economy to continue to constrain demand and limit any significant upside in global coffee prices.
Meanwhile, cocoa futures maintained an upward trend, but dealers said the upside has been capped by concerns about weakening demand after recent year-on-year declines in fourth-quarter grinds in Europe, North America and Asia.
March London cocoa gained two pounds or 0.1 per cent to 2,035 pounds per tonne.
March New York cocoa lost $2 or 0.1 per cent to $2,627 a tonne, but the contract gained two per cent in the week, after dropping three per cent in the previous week.
Top producer Ivory Coast said it will increase the amount of cocoa it processes domestically to 49 per cent of production from October with the addition of several new plants. This, according to analysts, is likely to result in cocoa exports.