Asian sugar supplies are expected to rise over the next week due to bigger-than-expected crops in Thailand and India, while major buyer Vietnam cuts back on new purchases, traders said.
The Vietnam Sugar and Sugarcane Association has asked the Trade Ministry to stop handing out sugar import quotas because domestic stocks and smuggled sugar were more than enough to meet domestic demand.
"The smuggled sugar plus the stocks held by domestic refiners will result in a surplus of 300,000 tonnes to 350,000 tonnes," the official Vietnam News Agency said in a report this week. The association estimated 450,000 tonnes of white sugar had been smuggled into Vietnam so far this year.
One kg of smuggled sugar, often Thai brought through Cambodia, is sold at 8,000 dong ($0.50) per kg, compared with around 10,400 dong per kg for domestically refined sugar. The Vietnamese government approved the import of 150,000 tonnes of sugar in March, but no deals have been made, traders said, pointing to the impact of smuggled sugar.
Thailand, Asia's largest sugar exporter, has had good rains in the past few months, fuelling predictions of a bigger-than-expected cane crop in 2006/07, which runs from October to September. "No official projection has been made, but traders and millers expect around 55 million tonnes of cane this year due to favourable weather and attractive prices," a trader said.
Thailand produced 46.68 million tonnes of cane in the current year. Thai exporters and traders are under pressure to sell in a bid to cut storage costs during periods of slack demand. "Around 700,000 tonnes of Thai sugar were stored so far this year, up around 50 percent from last year," a trader said.
"If things do not improve, Thai exporters will have to sell at a discount," he said. India's sugar output was expected to rise to 22-23 million tonnes in the 2006-07 crop year (October-September), up from 13.2 million tonnes in the current season.