Physical Sugar-Steady offtake, eyes on Russian harvest

http://www.reuters.com/article/2012/08/01/markets-europe-sugar-physical-report-idUSL6E8J1EJY20120801

August 01, 2012 at 10:52 AM


By David Brough

LONDON, Aug 1 (Reuters) - Physical sugar demand was steady this week during a typically slow period of the year as Ramadan buying was over, with dealers focused on Russia's harvest for clues about potential imports.

Dealers on Wednesday quoted very high polarisation Brazilian prompt raw sugar at 30 points over ICE October raw sugar futures , compared with 10 points over futures last week, and 30-35 points over futures in the previous week.

"It's a good, strong lineup at Brazil's Santos port," a senior physical sugar trader said. "It's steady buying."

Brazil is the dominant exporter at this time of year before northern hemisphere harvesting in the fourth quarter.

Furthermore, Ramadan is a quiet period in the global sugar market. Buying for the Muslim month of fasting has already wound up. Ramadan runs from July 20 to August 18.

Sugar shipments were brisk from Brazil this week as crushing proceeded at full capacity and the weather was drier after a prolonged period of rainfall that had delayed harvesting and contributed to bottlenecks at ports.

Dealers talked of congestion as sugar competed with other foodstuffs such as soybeans to reach ports by truck and rail.

Demand for raw sugar from refiners was steady, with the December-October whites-over-raws premium, a measure of refining profitability, standing at a comfortable $100 per tonne.

 

RUSSIAN CROP

Russian prices fell in the last week of July as the beet harvest began in the southern Krasnodar region earlier than expected, according to a global weekly sugar analysis of Green Pool Commodity Specialists.

One sugar trader, forecasting Russia's harvest at 4.5-4.8 million tonnes, taking into consideration current hot weather, said he expected the country to import some 500,000 to one million tonnes next year, likely in March to May.

Russia, which had been the world's top raw sugar importer in previous years and is now close to self-sufficiency, will likely export modest tonnages overland to neighbouring countries.

Russia was traditionally a buyer of Brazilian raw sugar shipped in bulk to the Black Sea.

Temperatures will be higher than usual in Russia during August, putting pressure on the summer's crop, Russia's state forecaster said on Wednesday.

India, the world's number two producer and top consumer of sugar, is likely to export a further 400,000-500,000 tonnes this season, dealers said.

The sugar market remains focused on the slow progress of the Indian monsoon, which could erode next season's production. It is 4-5 months until the start of the next Indian cane harvest.

"Next year the Indian government will likely be slow in giving permits for export," one trader said. "The authorities will want to track development of the domestic crop."

India held off any curbs on exports of agricommodities or restrictions on futures trade as it announced measures to cope with a 20 percent shortfall in monsoon rains, Farm Minister Sharad Pawar said on Tuesday.

India's poor monsoon rains have "badly affected" summer-sown crops in the western state of Maharashtra where farmers now need to focus on winter sowing, Prithviraj Chavan, chief minister of the state, told a news conference on Wednesday.

Maharashtra is the biggest sugar producing state in India.

Dealers said India could be an origin for white sugar imports to Indonesia, although Thailand was well-positioned.

Indonesia, Southeast Asia's largest sugar consumer, has issued import permits for 17,500 tonnes of the sweetener in a bid to ease price pressures, a trade ministry official said on Wednesday, less than six months after it banned imports for the whole year.

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