Sugar Seen Needing Further Drop by Thai Supplier to Lure Demand

Rates have slumped more than 50 percent from a 30-year high in 2011 as world production outpaced demand, helping spur a 14 percent decline in global food costs. Brazil, the largest supplier, and Australia are shipping cargoes into Asian markets, cutting Thai exports and forcing traders and millers to carry as much as 7 percent of the crop into next season, Parin said.

“It’s definitely a buyer’s market,” Tom McNeill, director at Green Pool Commodity Specialists, said in an e-mail yesterday. “The market still needs to fall further to stimulate prompt demand and to discourage so much production.”

Raw sugar on ICE Futures U.S. capped a third year of declines in 2013 in the longest losing run since 1992. Prices added 1.4 percent this year amid concern that dry weather may parch crops from Brazil to Australia.

Brazilian Supplies

Thai sugar for prompt delivery is bid at about 0.5 cent to 0.7 cent a pound below the Octobercontract in New York and offered at a discount of 0.1 cent to 0.2 cent, according to Green Pool. Bids for shipments from October to December are above the New York rate by 0.1 cent to 0.2 cent, it said.

“We should continue to see Thai sugar pricing at a discount as long as futures are above 16.5 cents,” Parin said. “If they fall below 16 cents, the price of Thai sugar would become flat against New York, an attractive level for buyers.”

Thai sugar is competing aggressively in Asia with Brazilian supplies, which are also trading below rates in New York, Claudiu Covrig, senior analyst at Kingsman SA in Lausanne, Switzerland, said by e-mail yesterday. Raws from the center-south region of Brazil for August delivery are quoted at a discount of 0.72 cent versus October, he said.

While the October contract will stay under pressure because of the global surplus and trade at 16 cents to 18 cents, a looming shortage next season may push March delivery as high as 20 cents by the end of the year, Parin said.

The world market will probably have a deficit of about 2 million metric tons in the 12 months from October as drought reduces the harvest in the center-south of Brazil, Covrig said. That compares with a surplus of 4.8 million tons in the year through September, according to Kingsman estimates.

Thailand is poised to carry over as much as 800,000 tons of raw and refined sweetener to next season, cutting exports in 2014 to about 7.7 million tons from an earlier estimate of 8.5 million tons, Parin said.

Shipments already fell 21 percent to 3.1 million tons in the first half from a year earlier, government data show. Millers face challenges in the next six months to nine months handling sugar from this crop and the next one, Parin said.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok atssuwannakij(at)bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4(at)bloomberg.net Ovais Subhani