THAILAND: Sugar premiums rise on poor weather and Ramadan
Published: 07/20/2012, 11:02:39 AM
Cash premiums for sugar in Thailand have risen this week and may rise further in the weeks ahead due to weather-related supply risks in top producers Brazil and India as well as Ramadan festival demand, according to Dow Jones.
Thai Hi-Pol for prompt shipment is being quoted over 300 points above the front-month October New York contract, up from around 260 points above the October contract last week, a trader in Bangkok said.
October raw sugar futures on New York's InterContinental Exchange rose 2.3% on week to settle at 23.25 U.S. cents a pound Thursday.
Last week, Brazil's main sugar industry group, Unica, reported that mills in the centre-south crushed 31.7 million metric tonnes of sugar cane in the second half of June, 25% less than a year earlier.
Though June is typically a dry month for centre-south Brazil, heavy rainfall caused mills in key areas to halt operations for an average of 11 days, Unica said, citing estimates from the Cane Technology Centre, or CTC, in Sao Paulo state. In June 2011, rain only caused problems for five days, it said.
The likelihood of an El Nino developing in the third quarter raises the risk for not only Brazil's but also Indonesia's and Thailand's sugar cane crop, traders said.
The short-term limited availability and increased expectations of an El Nino weather phenomenon, which is associated with lower precipitation in Southeast Asia, have prompted managed money funds to reduce their gross short position and increase their net long futures and options positions, traders said.
For white sugar, the net long rose by 69% to 7,339 lots in the week to July 10, according to the combined futures and options commitments of traders report from the derivatives arm of NYSE Euronext.
The monsoon in India has been slow to cover the country, intensifying the already dry conditions in many sugar-growing regions and raising concerns about the new season output, Rabobank said Friday. India's sugar production will continue to be a focal point for the international market as well as global prices, it said.
Last minute Ramadan-related buying has also underpinned Thai and world sugar prices, traders said, adding that global sugar prices could edge toward the 24 cents/pound level in the coming sessions due to strong demand. The month-long Muslim Ramadan festival has already started in some countries.