Thai sugar premiums seen steady, drought threatens new crop

Thai sugar premiums are expected to hold firm over the next few days as a severe drought threatens sugar crops this year and next, traders and industry officials said on Monday. Output for the current crop year ending September 30 is expected to be down 35 percent from last year, they said. "Drought has severely cut the crop and looks like it is going to also hit the next crop," said Boonthin Kotesiri at the Thai Cane and Sugar Board. Thai farmers, who produced 64.48 million tonnes of cane in the previous crop year, depend on rainfall to nurture their crop.
By last on Thursday, mills had crushed 47.78 million tonnes of cane.
Mills said they would crush only 20,000 tonnes a day before ending operations in the coming days, about a month than usual due to the smaller crop.
Thailand is a major Asian sugar exporter, shipping the sweetener to buyers including Japan, South Korea, Taiwan, Indonesia and Malaysia.
Traders said they were keeping a close eye on the next crop because persistent drought had prevented farmers from planting for almost four months.
"Without rain in the next month or two, the next crop will be at risk," said Rachai Choosinkul of the Federation of Sugarcane Farmers, which represents Thailand's 1 million cane farmers.
Drought has so far affected 11 million farmers in 71 of Thailand's 76 provinces, according to the Interior Ministry. The government started cloud-seeding operations in 22 provinces last week, but traders were skeptical that artificial rainmaking efforts would have much of an impact.
Meanwhile, traders from international trading firms are looking to buy sugar under forward agreements for 2006 shipment, exporters said. "They want to commit some forward deals now because of concerns about the next crop," said one official at a large exporting firm.
Exporters said they offered to sell Thai 100 ICUMSA white sugar for March-May 2006 shipment at $40 over London prices. But no deal was concluded because traders were bidding at only $30 over London prices.
ICUMSA 100 is considered consumer-grade sugar. A few small vessels have been booked to ship sugar in coming weeks, mainly for Indonesia, shippers said.