Asian sugar trade looking for direction
Published: 07/31/2012, 2:23:28 PM
Refined sugar was sold at smaller premiums to London futures this week after Thailand allowed millers to export more of the sweetener, but Indian whites extended gains, fed by fears over rains and rising domestic prices, according to Reuters.
Indian sugar futures rallied to a contract high at INR3,403 per 100 kg (US$61.23) on Monday on weaker-than-normal monsoon rains and a pick up in consumer demand during the festive season.
High sugar futures lifted the price of Indian white sugar in the physical market in Asia to US$620 to US$630 a tonne free-on-board from US$600 last week, with dealers noting buying interest from the Indian domestic market at the current level.
"I think people are buying because of worries there won't be enough rain. It's mainly domestic driven and they want sugar to remain in the country," said a dealer in Singapore.
"They are not looking to sell in the international market."
Annual monsoon rains are 21 percent below average since the four-month season began in June, threatening crops in the world's largest sugar consumer, which is also the second-largest producer after Brazil.
In 2009, New York raw sugar futures rocketed to their highest in nearly three decades after severe drought forced India to import about 2 million tonnes in the wake of exports of 5 million tonnes.
Thai white sugar, which competes with Indian sweetener, was offered at premiums of US$30 to London's October contract, down from US$40 to US$45 last week. A few deals were reported at smaller premiums.
"A few cargoes were traded yesterday at US$20 to US$25 for September and October delivery. Some cargoes went to the Philippines and Singapore," said the dealer in Singapore.
"Some of the buyers are covering stocks, with sugar prices down in the last week."
White sugar October futures on Liffe closed up US$6.00 at US$620.20 a tonne on Monday, but the contract has dropped more than 6 percent since hitting a four-month high at US$663.8 earlier this month.
Thailand, the world's second largest exporter after Brazil, has cut by 100,000 tonnes the amount of sugar the government will set aside from the 2011/12 crop for domestic consumption, allowing millers to export more.
Premiums for Thai high polarisation, or hipol raw sugar, edged down to 300 points to New York's October contract from as high as 320 points last week -- still their highest in two years.
Thai raw sugar premiums have risen to the current level due to recent high demand for white sugar ahead of the Muslim Ramadan fasting month and tightening stocks after the end of the crushing season on May.
Premiums for J-spec, or raw sugar for the Japanese market, dropped to 300 points from 325 last week.
"There's buying interest for hipol at around 250 points premiums, but you can't find people who to want to sell at such level," said a dealer in Bangkok.
Benchmark October sugar futures on ICE rose 0.28 cent, or 1.2 percent, to finish at 22.80 cents a lb on Monday, having hit a three-month high of 24.00 cents last week.
Cheaper Thai white sugar prices could attract more buying next week, while Indian sweetener may rise further because of fears the poor monsoon could lead to a drought.