Although drier climate circumstances in Brazil and reviews of fires in some rising areas will doubtless pressure shorts speeding to cowl positions, analysts see any drop within the Latin American nation being offset by India, Thailand, China and Mexico. India’s above-normal rainfall has added to the downward strain.
A extra clear indication for the bearish development stems from the cash managers rising their brief positions within the commodity. Analysis company BMI, a unit of Fitch Options, mentioned the shift in market sentiment is clear within the Dedication of Merchants knowledge from the Commodity Futures Buying and selling Fee.
Rise in shorts
In accordance with ING Suppose, the monetary and financial evaluation wing of Dutch multinational monetary companies agency ING, speculators elevated their internet brief in uncooked sugar futures traded on the InterContinental Alternate (ICE), New York, by 18,327 heaps during the last reporting week to 27,014 heaps.
BMI mentioned at the start of 2024, cash managers held a internet lengthy place in ICE sugar futures and choices of 23,823 contracts. “This peaked at 90,948 contracts on April 2, pushed by provide issues associated to the affect of El Niño on manufacturing throughout South-East Asian markets. Nonetheless, since April 2, the market sentiment has turned sharply bearish,” it mentioned.
By August 13, cash managers fully unwound their internet lengthy place and are actually holding a internet brief place of 6,084 contracts. “That is given the improved provide expectations and easing crude oil costs gasoline bearish sentiment,” mentioned the analysis company.
USDA forecast
In its short-term outlook and evaluation, the Meals and Agriculture Organisation, an arm of the UN, mentioned worldwide sugar costs typically declined since reaching their 12-year highs in September 2023, and in Might 2024, they dropped to their lowest worth since January 2023. The worth declines had been largely associated to improved world provide prospects, it mentioned.
The USA Division of Agriculture (USDA) mentioned in its “Sugar: World Markets and Commerce” report that world sugar manufacturing is forecast up by 2.5 million tonnes (mt) to 186 mt.
“Consumption is anticipated to rise to a brand new document with progress in markets resembling India and Pakistan. Exports are forecast decrease on account of diminished shipments from Brazil, India, and Thailand. Shares are forecast decrease as diminished shares in Thailand are projected to greater than offset an increase in shares in India,” it mentioned.
BMI warning
BMI mentioned manufacturing points and export restrictions in India have, nevertheless, offered a flooring for world costs all year long, countering the draw back results of a powerful Brazilian harvest.
Nonetheless, in response to the substantial downward strain on costs noticed all through the primary half of 2024, BMI has lower its forecast for the 2024 common front-month ICE-listed sugar worth from 20.8 US cents a pound to 19.6 cents. “On August 16, 2024, front-month sugar futures closed at 18 cents, marking a year-to-date decline of 13.7 per cent,” it mentioned.
However BMI cautioned that the Indian authorities has but to announce its export coverage for the 2024-25 season. “If it decides to keep up present export restrictions, we anticipate world costs to search out help,” mentioned the analysis company.
Sugar costs surged throughout 2021-2023 on issues over provide shortages, notably on account of points in India and Brazil, and the affect of El Nino on Asian provides. Nonetheless, with El Nino ending in April, the scenario has turned downhill for sugar.
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