Sugar demand in Asia is expected to remain strong and the fall in raw sugar futures could trigger more buying, a leading exporter said on Tuesday. "Right now, we are on the correction and the correction is broad based across all the commodities," said Robert Fidler, US-based strategist for Thailand's leading sugar exporter, Mitr Phol Sugar Corp.
World sugar prices soared to almost 20 US cents per pound in early February before falling to 16.55 US cents on Monday in New York, still far ahead of around 10.50 cents in September last year and record lows of 5 cents around five years ago.
"The correction is healthy for the sugar market. At the same time, the domestic price has been rising very quickly in India, Indonesia, China, especially Russia," Fidler told Reuters in an interview.
"So, we think last night and today, there will be some physical business to take advantage of lower prices, and more buying," he added.
"In the longer term, we're still friendly to the price because all world consumers have no stocks, everywhere, every country. If you name the country, they have no stock."
Those countries include China, Russia, Pakistan, Bangladesh, India, Indonesia and the Middle East.
"Asia will have a supply problem in 2006/07. We are going to have yet again a deficit in Asia, and for consumers to find suitable reasonable supply, that will be a big problem," Fidler said.
Pakistan was expected to import 900,000 tonnes and Vietnam's import demand could reach 500,000 tonnes, he added.
The Philippines still needs to buy even though it has delayed plans to import and demand from Indonesia is also expected.
"China should need to import 1.5 to 2 million tonnes this year, all white sugar," Fidler said.
Sugar premiums from Thailand, Asia's largest exporter of the sweetener, are expected to remain firm on low domestic supply.
Offers for Thai 100 ICUMSA white sugar, considered consumer grade, for March-April shipment were at $33 over London prices on Tuesday.
"Thai sugar premiums are expected to remain strong, or maybe a little bit firmer depending on New York," Fidler said.
"It cannot fall because the mills are going to start shutting down in the next week or so."
The crushing season started on December 10. Fidler estimated the current Thai cane crop at between 42.5-44.5 million tonnes, less than the 47 million of the previous crop due to drought earlier in the crop year and a reduced growing area.
Thailand's next crop could be bigger because domestic prices were good, he said.
"But we are losing cane land to alternative crops like tapioca, which will be used for ethanol," Fidler said. "Another factor is rubber. The government has been promoting expansion of rubber in Isan which is taking land away from cane," he said referring to the north-east, Thailand's largest cane growing area.
Fidler said Thailand was not facing fierce competition from cheaper European Union white sugar, some of which was going to the Middle East and South Asia before Asian buyers could buy it.