According to Angel Commodities, sugar is expected to trade sideways on expectation of selling pressure at higher prices as crushing season will start soon.
Angel Commodities report on Sugar,
Sugar prices continue to trade higher on anticipation of decline in cane output across the world due to strong El nino phenomenon. Sugar Dec contract closed 1.06 per cent higher at Rs 2,754 per quintal. Sugar output may slide 5 per cent to 270 lakh tonnes on poor and erratic rains in sugarcane growing areas. There are reports of severe damage to thousands of hectares of India's sugarcane crop due to erratic monsoon in the state of Maharashtra, which may affect sugar production.
In the recent development, government has decided not to extend export subsidy on raw sugar in the current 2015-16 marketing year starting this month. In March, govt extended subsidy of Rs 4,000 a tonne to export 14 lakh tonnes but could only export 4 lakh tonnes in 2014-15. As per ISMA, country’s sugar exports under the open general license (OGL) expected to hit 11 lakh tonne in 2014-15, compared with 21.8 lakh tonne a year before.
Global Sugar Updates
ICE Raw sugar futures hit a seven-month high after crush data from Brazil came largely within expectations. It is expected that demand for sugar may outstrip production by 5.6 million metric tons as El Nino weather phenomenon is affecting production forecasts in India, Thailand, South Asia and Central America. Prices of the sugar have gained due to wet weather in sugar-growing areas of Brazil hampered cane harvesting and after a recent gasoline price increase in Brazil boosted the demand outlook for cane-based ethanol. According to CFTC data, hedge funds undertook their biggest switch bullish in holdings since June last year. Earlier, International Sugar Organization (ISO) forecasted that the global sugar deficit could grow to as much as 6.2 million tonnes in 2016/2017, from 2.5 million tonnes forecast in 2015/2016.
We expect sugar to trade sideways on expectation of selling pressure at higher prices as crushing season will start soon. Subsidy in raw sugar exports may not be given due to WTO restrictions. However, pickup in festival demand and reports of lower production of sugarcane due to erratic monsoon may support prices.
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