Raw Sugar Prices Face Resistance at 20c/lb Mark

Raw sugar prices continue to struggle in their attempt to break through the 20 cents per pound resistance level, despite some positive signals. According to Lívea Coda, a Sugar and Ethanol Analyst at Hedgepoint Global Markets, "Last week, weakness in the energy sector and broader macroeconomic concerns overshadowed some of the bullish signals that had emerged."

While sugar prices did see a modest increase after the dollar correction on September 6, triggered by weaker-than-expected U.S. employment data for August, the market remained weighed down by other factors. Notably, the recent news of India potentially banning sugar exports did not have the expected impact, and prices ended the week lower.

India's Role in Global Sugar Trade

India, the world's second-largest sugar producer after Brazil's Center-South region, has reignited a central question in the market: Will India export sugar this season? The Indian government has indicated its intention to ban exports, aiming to meet its goal of achieving a 20% ethanol blending target by the 2025/26 season. However, the global trade consensus suggests that India’s participation in the sugar market is crucial, especially after Brazil's production took a hit due to recent drought conditions.

"The lack of a final decision leaves room for the market, and for us, to remain cautiously optimistic about potential Indian exports, which could ease some of the supply squeeze during the Brazilian off-season," Coda notes.

Indian Export Potential Tied to Prices

For India to consider exporting sugar, prices would need to rise above the 20c/lb mark. Given the domestic pricing situation and the expected deficit in global trade flows, Indian mills may demand a premium, potentially pushing export parity above 21c/lb.

"If the market is willing to pay, wouldn’t the government feel pressured to allow exports?" Coda asks. This is a possibility, particularly if production exceeds estimates, as was the case last season when many predicted a crop below 30 Mt due to the worst August monsoon in a century. However, production ultimately came in at 32 Mt, factoring in ethanol diversion.

Cautious Optimism Prevails

Despite the uncertainty, market experts remain cautiously optimistic. "A word of caution, however: if any export permission is granted, it will likely come after the new season starts and gains momentum," Coda warns.