Thailand's white sugar premiums under pressure

Thailand's white sugar premiums under pressure

BANGKOK (Reuters): Thai white sugar premiums are expected to come under pressure for the rest of this year and into 2001 if India starts to export up to one million tons of white sugar at subsidized prices, trade sources said on Friday.

Indonesia, traditionally the main importer of Thai sugar, may turn to Indian sugar if its prices come down, they said.

India's domestic price at the factory gate was quoted on Friday at US$350 per ton, still unprofitable for export.

Thai white sugar for October/November shipment was offered at around $280-$285 per ton on an FOB basis, mills said.

In terms of quality, Indian whites are bigger than Thai sugar in grain size, while polarization and moisture are about the same, traders said.

"However, it turns out to appeal to Indonesia as they love bigger grain size...their consuming culture is just that way," said one trader at a major U.S. trading firm.

With India's local sugar sector saddled with a nearly 10- million-ton stockpile, its government in June permitted exports of at least one million ton for 2000/2001 (October-September).

However, the Indian government so far has yet to decide whether to subsidize the export price, and if so, at what level, traders said.

Thai white sugar premiums for October/November shipment were quoted on Friday at $8 over London prices, while offers were at $14 over, unchanged from last week, traders added.

"As long as the matter is still under discussion by the Indian government, and no result has come out yet, Thai white sugar premiums are expected to remain firm," said a trader at a major European trading firm.

Up to 400,000 ton of Thai whites from the 1999/00 (October- September) crop year are estimated to be in the hands of mills and international trading firms in anticipation of Indonesian buying in October or November.

Indonesia's estimated 2000/2001 sugar production is 1.5 million ton, about the same as last year's, with consumption at about 3.1 million ton, according to the Indonesian Sugar Association.

Indonesia has yet to come into the market due to still ample supplies at home amid a crushing season that will not end until early September, traders said.

Brazil, the world's leading sugar exporter, is not expected to be a competitor to Thailand and India in the Indonesian sugar market due to its tight domestic supplies, traders said.

Some traders estimated as much as half of the one million ton of Indian sugar to be exported would likely to go to neighboring South Asian countries.

"Up to half of the total exportable quantity would likely to go to Sri Lanka, and Bangladesh due to geographical advantage, but of course not to Pakistan given political tensions between the two countries," one trader said.

"The remaining quantity is then expected to head to Southeast Asia, mainly to Indonesia."

Indonesia usually consumes white sugar, while Japan, South Korea and Malaysia normally import raws as they have their own refineries, traders said.