This Friday (June 5th), the international sugar market once again faced downward pressure.
The July raw sugar futures contract on the Intercontinental Exchange (ICE) closed down 13 points, settling at 14.14 cents per pound. The August white sugar futures contract in London weakened again after attempting a rebound during the session, closing at $446.90 per ton, down 51 points.
From the daily chart of the ICE July raw sugar contract, the recent trend shows a pattern of wide-range fluctuations with a downward bias.
The moving average system shows the current price of 14.12 has fallen below all major moving averages—the 5-day (14.28), 10-day (14.27), 20-day (14.60), 40-day (14.42), and 60-day (14.69). The alignment of these averages suggests a bearish trend, with short-term averages exerting downward pressure on the price, indicating insufficient bullish momentum.
The MACD indicator is operating below the zero line, with the green histogram expanding, showing that bearish forces are currently dominant.
The latest open interest stands at 340,000 lots, a decrease of 7,260 lots from the previous day, with trading volume at 117,940 lots. The decline in open interest alongside the price weakness suggests some long positions are exiting the market, reflecting a cautious sentiment among participants.
From a technical perspective, support levels to watch are the previous lows of 13.86 and 13.39, while the 14.42–14.60 area represents a dense zone of moving average resistance.
Key Factors Driving the Market
Several bearish factors are currently dictating the short-term direction.
The decline in crude oil is a significant drag. WTI crude oil fell over 3% this Friday. Lower fossil fuel prices reduce the competitiveness of ethanol, potentially encouraging global sugar mills to divert more cane towards sugar production, thereby increasing global sugar supply.
The weakening Brazilian Real is another factor. The Real fell to its lowest level against the U.S. dollar in about a month and a half, boosting the competitiveness of Brazilian sugar exports and increasing selling pressure in the international market.
The global supply situation is ample. Data from the Brazilian Sugarcane Industry Association (Unica) shows that sugar production in the central-south region for the 2026/27 crop year reached 2.475 million tons by mid-April, a significant 55.3% year-on-year increase, with sugarcane sugar content up 5.4% year-on-year. Concurrently, Thailand exported 1.6 million tons of sugar from January to April this year, a 29% increase year-on-year, further reinforcing expectations of ample supply.
Potential Bullish Factors
Weather-related risks remain a key focus for the market, providing some underlying support that limits the downside.
The Indian Meteorological Department has revised its forecast for June-September monsoon rainfall down to 90% of the historical average, from a previous estimate of 92%.
Data from the U.S. NOAA indicates an 82% probability of El Niño conditions forming between May and July, with a 67% chance of it developing into a "Super El Niño."
If drought conditions impact major producing regions like Brazil, India, and Thailand, it could threaten subsequent global sugar production, providing potential support for sugar prices.
Market Outlook
In summary, the raw sugar market remains caught in a tug-of-war between the pressure from ample supply and the expectations surrounding El Niño.
Under the triple weight of weak crude oil, a depreciating Real, and global production increases, sugar prices are more likely to trade with a weak bias in the short term, with technical indicators also failing to show clear signs of stabilization.
Some analysts maintain a strategy of selling on rallies in the short term, with a key focus on whether the previous low support level of 13.39 holds.
For the medium to long term, it is crucial to closely monitor the development of El Niño and the progress of India's monsoon rains. Should the El Niño narrative gain traction, it could potentially trigger short-covering and lead to a price rebound.
Investors are advised to manage their position sizes carefully and pay attention to the effectiveness of breaks through key support and resistance levels.
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