Physical Sugar-Demand picks up after futures selloff

LONDON: Physical sugar demand has picked up after a recent slide in futures created opportunities for hand-to-mouth buyers, brokers and analysts said on Wednesday.

Dealers noted buoyant cash demand for both raw and white sugar, quoting prompt Very High Polarisation (VHP) raw sugar at ICE October futures plus 80 points.

ICE October raw sugar futures were down 0.46 cent or 1.7 percent to 27.03 cents a lb at 1431 GMT, 15 percent below a contract high of 31.68 cents a lb touched on July 25.

ICE raw sugar futures slid from near 5-month highs, caught up by fears over recession that swept through financial markets.

A European broker noted recent white sugar business, adding, "The whites are tighter than we had expected."

He added, "The Brazilian mills are making less white sugar for export than in previous years and it seems that the Thais are remelting fewer raws than expected."

An analyst with a large Western trading house said, "Physical values are at a premium and reflect the strength of exports out of Brazil."

Recent examples of non-routine cash sugar deals include a purchase of 50,000 tonnes of raw sugar by Egypt's state-backed SIIC, a Tunisian purchase of 14,000 tonnes of white sugar for September delivery, and deliveries to Iraq, dealers said.

Egypt's state-owned Sugar and Integrated Industries Company (SIIC) said on Monday it has bought 50,000 tonnes of sugar from Brazil in a tender for October and November shipments, confirming earlier traders' reports.

Tunisia bought 14,000 tonnes of sugar in a tender, a government official said on Wednesday.

Dealers said this tender appeared to represent hand-to-mouth demand as the shipment period was very soon, shortly after Ramadan.

Iraq's Umm Qasr port has received seven ships carrying a total of 235,000 tonnes of Thai and UAE white sugar, which will cover the country's needs through September, trade ministry officials said on Wednesday.

Copyright Reuters, 2011