Thai sugar premiums steady

Thai sugar premiums are expected to hold steady over the next few days, backed by reduced supply as the harvest season draws to a close, traders said on Monday. In the secondary market, Thai 100 ICUMSA white sugar for May-June was offered steady at $43 over London prices with bids offered higher at $40, up from $35 last week. "Thailand's harvest and crushing season is ending. By March 15, all mills will stop crushing cane," said Boonthin Kotesiri of the Thai Cane and Sugar Board.
"We estimate the crop at about 48 million tonnes, much lower than the previous crop due to drought," Boonthin said referring to the current crop ending Sep.30.
Thailand, a major sugar exporter in Asia whose key buyers include Japan, South Korea, Taiwan, Indonesia and Malaysia, produced 64.48 million tonnes of cane in the previous crop year. By March 3, mills had crushed 46.4 million tonnes of cane and said they would end crushing in the next few days, about a month than usual due to the smaller crop.
So far, three mills, Chiang Mai, Mae-Wang and Suphanburi have closed their crushing operations, traders said. Persistent drought in the north-east, which produces about 40 percent of the country's cane, has prevented farmers from replanting for more than three months.
"There was rain in a few areas over the weekend, but unfortunately it did not fall in cane growing areas," said one trader.
Exporters said they are not keen to sell more forward contracts to overseas buyers due to concerns about the crop and because they were waiting for the government's decision on the domestic consumption of sugar, or Quota A.
"The Commerce Ministry is expected to hold a meeting this week to decide whether to raise Quota A," a ministry official said. "It is mostly likely that we will raise the quota to meet higher demand from the food industry."
If the ministry decided to raise the quota, exporters would be asked to allocate more of their sugar to Quota A, traders said. Exporters were estimated to have no more than 500,000 tonnes left unsold this year, traders said.
The government has set Thailand's 2005 Quota A at 1.9 million tonnes this year, down from 1.92 million tonnes last year. The government allows food manufacturers who produce food for export to buy sugar either from Quota A, or from Quota C for export depending on prices.
Shares in Khon Kaen Sugar Industry PCL, Thailand's fifth largest sugar producer, rose 4.2 percent to 4.48 baht ($0.12) on their market debut on Monday from an initial public offering price of 4.3 baht.