Demand for sugar from Asian countries is expected to remain strong with India importing more raw sugar in the coming months while Indonesia will issue more import permits for the sweetener. Traders said about two million tonnes of raw sugar has arrived in India since imports began two years ago and India, the world's biggest consumer of the sweetener would need between 250,000 and 500,000 tonnes more.
With easing of international raw sugar prices, Indian importers were again being enticed to make purchases. "If prices stay at these levels, India could buy some cargoes in the coming weeks," said one trader. "They are slightly lower than levels at which some purchased in March."
Raw sugar is priced at around $250 a tonne including freight costs at Indian ports this week, which was lower than prices that prevailed in March, Indian traders said.
In New York, the benchmark May raw sugar contract rose 10 cents to end at 8.18 cents per pound on Monday. There was talk in the market that the Indian government was considering ending incentives on raw sugar import on expectations of a good monsoon and a healthy domestic crop.
"The government is considering whether they should withdraw the duty free facilities because the monsoon is predicted to be good," said one trader.
India imposes a customs duty of 60 percent on sugar imports, but has allowed local sugar mills to import raw sugar duty-free under an advance-licensing scheme, with an obligation to export the same quantity within three years.
India is expecting a good cane crop in the new season that begins in October, with sugar production expected to recover to 17.5 million tonnes in the year to September 30, 2006, from 12.5 million tonnes in 2005.
Traders said they were keeping a close eye on China amid talk that the country may face more domestic shortfalls than expected, forcing them to buy from the world market in coming months, estimated as much as 1.5 million tonnes.
The China Sugar Association has lowered its estimates for sugar output in 20005 to 9.4 million tonnes, lower than expectations of 10 million tonnes. Domestic consumption was seen at 11 million tonnes.
In Indonesia, raw sugar import permits are expected to be issued in the near term to fulfil capacity of state mills during the crushing season that runs from May to November.
The country's raw sugar imports are seen at around 227,000 tonnes this year, higher than last year as smuggling of the sweetener has been significantly reduced.
"The volume isn't final yet as it needs to be further discussed with related ministries," said a trader who declined to be named. In 2004, Indonesia, Southeast Asia's largest sugar buyer, bought nearly 200,000 tonnes of raw sugar, mainly from Thailand.
Indonesia placed curbs on sugar imports in late 2002 to protect the minimum price of sugar from an influx of cheap imports and rampant smuggling.
The agriculture ministry projected sugar output in 2005 to rise around nine percent to 2.2 million tonnes, as Indonesia moved toward its target of ending sugar imports by 2007.
Trade in Thailand has been quiet this week with exporters left with little sugar for sale at the end of the harvest and crushing season. Very few exporters are interested in selling cargoes and prefer to watch the next crop as a severe drought prevented farmers from planting for four months, traders said.
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