Inquiries emerge as futures tumble; Indian whites slip

SINGAPORE: Fresh inquires emerged after New York sugar futures dropped to their weakest since June on fears of a global recession, while Indian whites weakened as competition from Brazil intensified, dealers said on Friday.

Asian stocks slid to a 16-month low and emerging market currencies fell on Friday on fears the developed world is stumbling back into recession, while a pledge from the G20 to preserve financial stability left investors largely unimpressed.

ICE October raw sugar futures tumbled 4.3 percent, to end at 25.67 cents a pound on Thursday, tracking the broad declines in crude oil, other commodities and equities. It had hit a three-month low at 25.31 cents.

Thai high polarisation, or hipol, raw sugar for prompt delivery was offered at premiums of between 60 to 70 points to the October contract, down from as high as 100 points last week, with bids at much lower levels.

"Physicals wise, more inquiries are coming in, maybe because people are scared that prices will shoot up again," said a dealer in Singapore. "There are bids for hipol at 20 to 30 points and even lower," said the dealer, adding there were no deals yet.

A bumper crop in Thailand, the world's second-largest exporter after Brazil, weighs on Thai sugar premiums and many consumers have secured supply for the rest of this year. India is also keen to sell excess sugar, while more sweeteners from Brazil are being offered in the physical market.

Thai raw sugar for March-May 2012 delivery was bid at 50 points and offered at 75 points to the March contract , hardly changed from last week.

Thailand is forecast to produce around 100 million tonnes of sugar cane in the 2011/12 crop, the highest ever, which would yield around 10 million tonnes of sugar.

The prospect of rising output took its toll on premiums for J-spec, or low-quality Thai raw sugar favoured by Japanese consumers. Buyers wanted the variety at discounts to futures, while sellers wanted to sell J-spec at 30 premiums.

The value of Thai J-spec has plunged from as high as 500 points in July as harvests in Thailand approach and also because of persistent offers of raw sugar from the Philippines.

"Prompt J-spec is bidded 30 points under New York, but offer is at 30 points premiums. There are no deals because of a wide gap between bid and offer," said a dealer in Bangkok.

"Trading is thin, so it's difficult to find a realistic value. People will be asking for ridiculous prices."

Weaker London sugar futures lifted Thai whites premiums to $60 from $35 last week, but the higher value had nothing to do with demand. India whites, which compete with Thai sweeteners, were also deserted by buyers.

"Indian white sugar is currently offered at $710 FOB, while Brazilian fetches $700 per metric tonne," said a dealer in India. "With the futures market dropping substantially, Brazilian sugar is becoming cheaper than Indian sugar and will put pressure on prices."

Other dealers in Singapore quoted Indian whites for prompt delivery at between $710 and $720, with no business reported. The sweetener was offered at $760 last week.

India is expected to produce at least 24.6 million tonnes of sugar in the new season from October, slightly up from this year, Food Minister K.V. Thomas said on Wednesday, releasing a preliminary output estimate that could be revised upward.

WEEKAHEAD

Rising supply could weigh sugar premiums next week, but lower prices could also stir interest from consumers such as China.

"Buyers have been hesitant to buy in the last couple of months, but with prices falling considerably, we hope that buyers such as China and the Middle East will return to the market," said the dealer in India.

China's sugar demand could outpace output by more than 2 million tonnes in the year to September 2012 after a prolonged drought hit the growing region, triggered a supply shortage and forced Beijing to release stocks to cool record high prices, a Reuters poll shows.

Copyright Reuters, 2011