Wednesday, November 4, 2009

>Asian sugar prices rise, reduces buying; millers slow sales

Singapore - Sugar prices in Asia rose in the week to Tuesday, reducing buying interest, while millers slowed sales after having contracted as much as 80% of output from a new crop.

Cash premiums for J-spec raw sugar for January-March shipment were around 10 points to the ICE March contract, while those for March-May shipment were around 25 points, both little changed from a week earlier. The benchmark March ICE sugar contract settled at 23.44 cents a pound Monday, up from 22.93 cents a week earlier.

Millers slowed down sales because they have signed contracts for most of the expected output even before crushing of the new crop had begun, and are being cautious amid an uncertain outlook on the harvest due to persistent rains in some key growing areas, traders said. The crop is expected to be harvested in mid-November this year if the weather is favorable.

"There are rains still in some growing areas," said a sugar trader at a commodities trading house. "Crushers hope the rains will stop in mid-November, so that they can start (crushing) before the end of this month."

Officials in Indonesia and China expect production this season to fall compared with a year earlier due to erratic weather and lower acreage, likely adding further pressure on regional supply.

Sugar prices also rose in India. In Mumbai's Vashi market, S-30 grade sugar was quoted at INR32,000-INR33,000/ton, up from INR29,000-INR29,600/ton a week earlier.

"The delay in crushing in Uttar Pradesh is pushing up the price," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants' Association.

Crushing in Uttar Pradesh, India's second-largest sugar producing state, will likely be delayed to mid-November with farmers demanding higher cane prices.

Lower open market sale quota for November is also supporting prices, he said.

The government has fixed the open market sugar sale quota for November at 1.5 million tons compared with 1.85 million tons in October.

Still, local prices aren't likely to rise much beyond INR35,000/ton as output from a new season is expected to arrive in the market by early next month, Kuvadia said.