Asian sugar prices seen falling

Sugar premiums are being weighed down by the prospect of larger-than-expected supply of the sweetener in Thailand, the world's second-biggest exporter, at a time of thin demand, dealers said on Tuesday. With most buyers sidelined, waiting to buy when prices reach bottom, traders expect prices to slide further in coming weeks.
The premium on Thai high-polarisation raw sugar was offered at 195 points over New York raw sugar futures, down from last week's 200 points. "But buyers bid at only 165 points, reflecting thin demand as they realised supply was rising," said a Bangkok-based trader.
The premium on Thai white sugar was steady, at around $30 per tonne above London white sugar futures. However, bids were at $25. New York's May raw sugar contract on ICE Futures US shed 0.23 cent to close at 27.48 cents per lb on Monday. London's May white sugar futures fell $4.30 to end at $706.30 per tonne.
With bumper crops in major sugar producing countries, including Brazil, India and Thailand, sugar prices were likely to drop further, forcing traders to offer at lower premiums in order to win contracts. The current 2010/11 sugar output in Brazil's centre-south region, the major sugar area of the world's biggest sugar producing country, reached 33.47 million tonnes by February 1, up 17.8 percent from a year before, according to the cane industry association Unica.
Thailand was also forecast to have record sugar output in 2010/11 of around 8.0 million tonne of sugar from around 80 million tonnes of cane output, the highest ever, traders said. There was no official forecast available, but the Office of Cane and Sugar Board (OCSB) agreed Thailand could potentially produce as much as 8 million tonnes.
"At this point we can say conservatively that we can produce 7.6 million tonnes of sugar definitely, which would be a record. Production could reach 8 million tonnes or not, it depends on the yield, which no one knows at this moment," the OCSB's secretary-general, Prasert Tapaneeyangkul, told Reuters.
India, the world's second-biggest producer after Brazil, was also likely to release another 200,000 tonnes of sugar onto the market as the government was expected to allow further exports due to a domestic surplus. "At this point, buyers can wait to buy when prices are cheaper than these levels as they know that supply is rising, so they are not rushing to buy," said another trader.
SLIGHT DISRUPTION: Japan's devastating earthquake and tsunami have damaged two sugar refineries, but traders and industry officials said they did not expect any drop in sugar exports to Japan. On the other hand, traders expected Japan to import more sugar this year to offset falls in domestic production in Hokkaido, hit by excessive rainfall late last year.
Despite their problems, Japanese companies were not defaulting on sugar purchases. "Shipments were delayed slightly, but there's no sign of default or force majeure," said a trader who does business with Japanese clients.