Thai sugarcane output revised up, premiums fall

Thailand, the world's second-biggest sugar exporter, could produce a record 100 million tonnes of sugarcane in 2011/12, which would yield around 10 million tonnes of sugar, sending Thai premiums for next year's delivery down more than half.
The cane forecast by the Thai Sugar Millers Corporation on Thursday matched that by the International Sugar Organisation (ISO) this week and was well above a projection by Thailand's Office of Cane and Sugar Board (OCSB) earlier in August of 92-95 million tonnes of cane, or 9.2 million tonnes of sugar.
"And with a new record bumper crop, our 2011/12 crushing season should start in early November, around 2 weeks earlier than usual," said Prakit Pradipasen, head of the corporation. In the 2010/11 crop, Thailand produced 9.6 million tonnes of sugar, the highest ever. In the past, 7 million tonnes has been more usual. The higher forecast is giving buyers bargain opportunities. "The premium has softened to 30 to 40 points and business has been done at these levells," said a dealer in Bangkok "People have been reluctant to buy sugar but now, the crop is bigger than expected. That's why premiums are lower."
Earlier this week, Thai high polarisation, or hipol variety, for first-half 2012 delivery, was offered at premiums at 60 to 70 points to New York's March contract - almost on par with Brazilian raws. Next year's Thai sugar was bid as low as 20-point premium this week, suggesting that consumers were aware of rising production. Premiums for prompt delivery were above 200 points, but bids much lower at around 100.
"I think 30 to 40 points are now reasonable values. You know that most buyers are looking to buy at those levels," said a dealer in Singapore. "Most people have adopted a wait-and-see attitude because of the prospect of rising output. You didn't see bids when the sugar was offered at 60 to 70 points premiums." Prakit said the significant rise in cane output was due mostly to crop-switching, which helped increase planted areas, plus ample water supply. Sugar prices hit a 29-year high last year, which encouraged Thai farmers to switch to sugar from tapioca and corn.