Indonesia likely to chase cheap Indian white sugar

Indonesia, Southeast Asia's largest sugar consumer, could turn to Indian supplies despite quality concerns, while a few deals for Thai raws were struck in an otherwise slow physical market, dealers said on Tuesday.
Indonesia's state procurement agency Bulog failed to secure any of the 60,000 tonnes of white sugar it sought in a tender on Monday because of high prices, but it could hold another tender as the country needs extra supply before the crushing season starts in May.
"I think the most likely source is going to be India. They are also selling sugar on flat price basis," said a dealer in Jakarta. "If the Indian sugar turns up to be problematic, then we have to accept it. It's normal," said the dealer, adding that Thai white sugar was far more expensive. Indian white sugar was offered at $740 to $750 a tonne free on board, much lower than London's March futures which hit a contract high of $823 a tonne before the Christmas break.
On the other hand, Thai white sugar fetched a premium of up to $30 a tonne above London futures. Indonesia, which imports more than 2 million tonnes of raw and white sugar annually, normally buys the sweetener from Thailand, Brazil and Australia. But, with India likely selling back cargoes it had bought previously, dealers said the quality was deteriorating after the sweetener was stored for months in warehouses.
India, the world's second-largest producer after Brazil, will allow unrestricted exports of 500,000 tonnes of sugar, the farm minister said on December 15, as the country swings back to a surplus in domestic supply. "Bulog will hold another tender but they are likely to wait for the international prices to fall. We don't know yet when," said a Jakarta-based dealer, who participated in Monday's tender. "It has to be done because of falling domestic output."
Bulog has a permit to import 60,000 tonnes of white sugar as part of Indonesia's plans to import 450,000 tonnes for household consumption to bridge an anticipated shortfall in local production. On Monday, Bulog wanted to buy at $749.30 a tonne while the lowest offer price from suppliers was $769.85. The agency also declined to buy any sugar at an initial tender held in October.
WEEK AHEAD Dealers will wait for a possible tender by Bulog and the progress of sugar crushing in Thailand, the world's second-largest exporter after Brazil.
Thai refined sugar was sold to unspecified buyers at premiums of $30 a tonne above London futures. Thai white premiums were offered at between $25 and $50 over London last week, reflecting an illiquid market. Thai raws were traded recently at 90 points above New York March futures but buyers were now looking for cheaper prices as trading slowed to a trickle.
"The physical market has been totally quiet. $25 premiums will be the buying idea for whites, but sellers will not sell at that level especially for the first quarter of next year because supply is still tight," said a dealer in Bangkok.
"Raws value for March to May is under pressure. Sellers are looking for bid at around 90 points but most buyers are targeting 50 to 60 points premiums," he added. Thailand is expected to produce about 6.8 million tonnes of sugar in the current crop year, down slightly from 6.9 million in the previous crop. Dealers expected fresh supply from Thailand to enter the physical market sometime in January.