Premiums for Thai white sugar struck another record at $180 over London futures on tight supply and firm demand, dealers said on Friday, adding that consumers were likely to pay up. A decision by Thailand, the world's second-largest sugar exporter after Brazil, to buy back white sugar at a tender this week also helped premiums surpass a June peak of between $120 and $150.
No deals were reported yet, said dealers on the sidelines of a sugar conference in Bali. "There's not much stocks left. Thailand wants to buy 100,000 tonnes but it only managed to get around 75,000. The premiums have gone up to $180 on an FOB basis," said a dealer at an international trading house, which still has some Thai sugar left for sale.
"We've offered whites at $205 (premium), including freight. I guess people will eventually just grab any offer," he added. Thailand bought back 74,350 tonnes of sugar from the world market on Tuesday to tackle a rare domestic shortage and said it may buy more if supplies at home stay tight. "I won't be surprised if the premiums go up even further to $200," said another dealer. "Thailand has no stocks."
An official at the Office of Cane and Sugar Board (OCSB) told Reuters on Thursday Thai sugar output could drop to as low as 6 million tonnes in the 2010/11 season because of a severe drought. The new estimate for the crop year starting in November is much lower than a previous forecast made by the OCSB in May for unchanged output of 6.9 million tonnes, forcing the government to import sugar for the first time ever to cover a domestic shortage.
London white sugar futures have gained by more than a third since an early May low, on logistical bottlenecks in Brazil and the prospect of Thailand's entry into the physical market as a buyer. The next tender has yet to be decided, according to the OCSB Jonathan Kingsman, head of the Lausanne-based Kingsman SA consultancy, expects the global white sugar market to see a deficit of around 1 million tonnes in 2010 after being in balance last year. Demand for sugar typically surges in top consumer India during the festival season from August to October, when people eat more sweets, and in Indonesia and other Muslim nations ahead of the fasting month of Ramazan.
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