Moves by India and Indonesia to ease curbs on sugar imports are insufficient to trigger extensive purchases or ignite a rally, as crushing seasons pick up pace and domestic prices slide in India. Early in September, front-month New York raw futures powered to a 28-year high above 24 cents a pound on speculative buying driven by Indian demand, with sentiment also underpinned by the prospect of purchases by Indonesia, Mexico and Pakistan.
But profit taking and fears that sky-high sugar prices could eventually curb consumption erased some of the gains, while London white sugar now trades more than 7 percent below a record of $621 a tonne hit in early October. Top consumer India, which has waived duties on imports of white sugar until 2010 to bridge a supply gap caused by a poor monsoon, may still buy small quantities to satisfy a surge in festival demand before cane crushing starts this month.
And Indonesia, Southeast Asia's largest consumer of sugar, which cut import duties on the sweetener on September 30 after domestic prices hit a record, is most likely to stay away from the white sugar market, although will import some raws before crushing ends in November. But analysts say global traders have already priced in most of that anticipated demand, and with New York futures now trading 12 percent below September's 28-year high, only surprise purchases could lift prices beyond the peak.
"How much more bullish news is out there?" asked Mark Hewlett, a commodity analyst at Cornhill Capital in London. "Strong demand and lack of supply is already mostly priced in. When a market is like this, the risk is to the downside." New York's March contract hit its lowest in two months on Thursday, at 21.80 cents, after liquidation over worries about weakening demand. Cash sugar prices in India hit a two-month trough the same day, on confusion over stock limits imposed by the government to check hoarding.
INDIA AIMS TO SATISFY SWEET TOOTH A poor monsoon that decimated the cane crop ahead of the annual festival season and a switch by farmers to better paying wheat and rice flipped India into a net importer, buying a record 5 million tonnes of raw sugar in the just-ended crop year to September - the same amount it exported a year earlier.
Traders said India had received more than half the imports of raw and white sugar it had contracted to buy and although floods hit the country's southern and western parts ahead of crushing in the new crop year, sugarcane areas had largely escaped damage. "I doubt it will trigger a surge in Asian demand in the fourth quarter," said a Singapore dealer, who sells sugar to India.
"What it may do for India is switch the willingness of buyers to buy whites rather than raws, and therefore allow a little more time for them to make a decision. With raws, they need to be imported, transported and processed," he added.
India has imposed stock limits on bulk consumers, wholesale traders and retailers of sugar to check hoarding and discourage profiteering during the period of greatest demand from August to October, when festival consumption of sweets surges. But even if India wants to buy more white sugar, exporters would have to make sure the sweetener arrived before the crushing season started later in October, although the floods could also cause delays in harvesting the cane crop.
"I don't think India will import any white sugar after the crushing season starts," said a marketing manager at one of Thailand's main sugar millers. "Imports from Thailand should be a maximum of 400,000 tonnes." Late sown crops would provide fodder for India's crushers, one analyst added.
"Crushing output is unlikely to be affected as a loss of the crops sown earlier and now in maturing phase will be most likely compensated for by the gains of the late sown or ratoon crops," said Ajeet Kumar, at brokerage SMC Comtrade in New Delhi. Ratoon is the root stub of cane after an initial harvest that remains in the ground to grow again for a subsequent crop.
INDONESIA AIMS FOR LOWER PRICES Indonesia, where sugar is a politically sensitive commodity whose shortage helped trigger late-1990s riots that rang down the curtain on the decades-long rule of President Suharto, is trying to rein in sugar prices that are hovering near a domestic record. Prices soared to a record 11,000 rupiah ($1.17) a kg on the global price spike in August, and have stayed in that vicinity since.