Raw sugar premiums dropped on Thursday as the prospect of a bigger-than-expected crop in Thailand weighed on sentiment, but cheaper prices could attract buying from consumers. Thai raws of high-polarisation variety were traded at premiums of 200 points to New York's May contract, down from 280 points last week. There were no offers for Thai raw sugar for the Japanese market, or J-spec.
Two sugar refineries in Japan have been partly damaged by last week's devastating earthquake and tsunami, dealers said on Thursday, adding that refining activity had been shifted to the western part of the country.
"There are no refineries in Tohoku area, which is the centre of the devastated area. Two refiners in Chiba were partly damaged, but it's not serious," said a dealer at an international trading house in Tokyo. "Because of this situation, refiners have shifted their activity to the western part of Japan."
While the disaster in Japan had little impact on physical trading in Asia, dealers turned their attention to the crushing season in Thailand which is expected to end next month, as well as sales from India.
Thailand, the world's second-largest sugar exporter after Brazil, is forecast to produce around 7.8 million tonnes from the current 2010/11 crop, up 14.7 percent from an initial forecast of 6.8 million to 6.9 million tonnes. The crop was estimated at 6.9 million tonnes in the previous year.
"The crop is still putting pressure on Thai sugar and there's a bit of a rush to sell. Opportunistic buyers such as Indonesia and China will find the current price more palatable," said a regional dealer. "But I think India has missed a good opportunity to sell. The price has dropped," he added.
India, the world's second-biggest producer behind Brazil, has flip-flopped on 500,000 tonnes of unrestricted sugar exports, termed Open General Licence (OGL) sales. In December, a minister said mills could export the permitted quantity. About a month later, the government, under pressure over rising food inflation, referred the issue to a panel of ministers. The panel is yet to take up the issue.
New York's May raw sugar contract on ICE Futures rose 0.20 cent to trade at 25.85 cents per lb on Wednesday, but the contract was well below a 30-year high around 36 cents hit in February. London's May white sugar futures gained $1.50 to finish at $668.60 per tonne. Thai white sugar was offered at a premium of $25 to $30 over the London contract, down from $40 last week.
WEEKAHEAD Dealers expected Thai premiums to stay under pressure next week, with India likely to offer cheaper sugar following declines in New York and London futures. India whites were offered at $720 to $750 a tonne, down from as high as $770 last week.
"Indian sugar price has really dropped since last week which has attracted buying interest," said another regional dealer, who trades Indian sugar. "But we don't see much trading this week because many buyers are waiting for direction. I would think if futures markets maintain their bearish trend, more demand will emerge soon." India's output in the new season that began October 1 has been variously estimated between 24.5 million to 25.5 million tonnes, while consumption is forecast by the Indian Sugar Mills Association at 22 million tonnes, leaving room for exports.