Many factors are good for the sugar market
During the Spring Festival, ICE raw sugar futures rose sharply, and all contracts achieved five consecutive positives. Among them, the main March contract rose by 1.33 cents/lb, an increase of 6.75%, breaking through the pressure levels of 20 cents/lb and 21 cents/lb in a row , the pattern of near strength and far weakness is more obvious. Under the influence of complicated holiday news and positive fundamentals, the sugar market has been rising steadily.
Changan Futureswhite sugarResearcher Liu Lin told reporters that from the perspective of the supply side, heavy rains have inhibited the growth of sugarcane, leading to a possible reduction in India’s production. Since India is in the crushing period, the reduction in production will affect the sugar market supply and short-term trade flow in the long term. Affected by the heavy rain, the Mabang sugar factory in India’s largest sugar-producing state may end the crushing season 45-60 days ahead of schedule, and the state’s output may drop to 12.8 million tons, compared with the previous forecast of 13.8 million tons. Kabang, one of the top three sugar-producing countries, has also reduced production, resulting in a high probability that India’s production will be lower than expected, which will continue to benefit the sugar market.
“As one of the major exporting countries, the downward revision of production means a decrease in exports.” According to Liu Lin’s analysis, India currently approves an export quota of 6.1 million tons, of which 5.7 million tons have signed an export contract, which means that the export quota is almost exhausted, but Considering that the output of Mabang and Kabang has been lowered, and the government has suppressed the demand for food price inflation, the Indian Sugar Mills Association and other trade organizations have asked the government to allow an additional export of up to 4 million tons or it may be difficult to achieve, and there is even the possibility of not allowing additional exports. The short-term trade flow may continue to be tight, supporting the rise in sugar prices.
In addition, Petrobras raised the price of gasoline in Brazil from 3.08 reals per liter to 3.31 reals per liter, and raised the price of gasoline in refineries by an average of 7.5%, further stimulating the rise in the sugar market. Liu Lin said that the increase in gasoline prices means that the price advantage of alternative ethanol is prominent, which is conducive to suppressing the enthusiasm of sugar factories to maximize the sugar-to-alcohol ratio.
“It is worth mentioning that the strong demand in the international market has also provided good support for international sugar prices.” Hu Linxuan, a white sugar researcher at Guohai Liangshi Futures, said that the demand for imports in international trade has kept Brazil’s sugar prices going until the start of the 2023/2024 production season. Maintain a high monthly export volume, while Brazil has destocked and exported for the fourth consecutive production season. China is one of the largest sugar consumers and importers in the world. If the expected recovery of demand in the domestic market is confirmed, it will be a powerful boost to the consumer side of the international sugar market. The rebound in domestic sugar demand is reflected in the sales data in December last year. already manifested. According to the travel situation during the Spring Festival holidays, the number of tourists traveling across the country exceeded 300 million, recovering to nearly 90% of 2019, a year-on-year increase of 23%. Sugar, as a daily necessities, is obviously driven by the increase in social and economic activities, so the rebound in consumption in the following months is expected to be a high probability event.
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