Sugar futures prices soften due to strength of dollar

13-Nov-2024 02:39 PM

Sugar futures prices have recently softened, largely influenced by the strengthening of the U.S. dollar, which hit a 4.25-month high. On the New York exchange, raw sugar futures for the March contract dropped by 0.01 cents (or 0.05%), while on the London exchange, white sugar futures for December delivery fell by $8.80 per tonne, a decline of 1.59%.

Despite these losses, a significant fall in sugar futures prices was avoided due to short covering in the later stages of the trading day.

Following the release of the UNICA report, which detailed key developments in Brazil's sugar industry, buying activity began to pick up, providing some support to the market.

The UNICA report highlighted a 24.3% decline in sugar production in Brazil’s central-south region during the second half of October, down to 1.785 million tonnes.

However, overall production from April to October 2024 rose by 0.3% to 37 million tonnes. This indicates that while sugar output in the critical central-south region has slowed, it has remained relatively stable compared to last year.

That said, future production could face further declines due to ongoing challenges, including severe weather events and crop damage from fires during August and September, which destroyed thousands of hectares of sugarcane.

The Brazilian government’s agency Konab recently reduced its sugar production forecast from 42.7 million tonnes to 42 million tonnes, with some analysts predicting that the actual figure could fall below 40 million tonnes.

Similarly, Rabo Bank and Data Agro have revised their estimates downward, forecasting production of 39.3 million tonnes and 38.7 million tonnes, respectively.

This mix of factors – the stronger dollar, weather-related disruptions, and adjustments to production forecasts – is contributing to volatility in sugar futures markets, although it seems there is some underlying support due to concerns over future production shortfalls.