Thai sugar premiums rise as drought slashes output

Thai sugar premiums rise as drought slashes output

Buyers of sugar from Thailand are paying more to secure supplies as a drought reduces cane output to the lowest in at least four years.

Thai raw sugar for loading between March and May was bid at a premium of 0.85 cent to 0.9 cent a pound over futures in New York, Swiss Sugar Brokers said in an e-mailed report Thursday. That’s at least 31% higher than a week ago, data from the Rolle, Switzerland-based company showed.

Thailand, the world’s second-largest exporter, may see sugar-cane production fall below 100 million metric tonnes in the 2015-16 season ending in September, according to the Thai Sugar Millers Corp. That would be the lowest since 2011-12. In the first 91 days of the season, sugar output was already 10% below last year, the millers said.

Thailand’s sugar-cane crushing is "dropping fast," said Naim Beydoun, a broker at Swiss Sugar Brokers. More buyers are "paying up in a void of offers."

A smaller crop in Thailand is fuelling concerns supplies will fall short of demand this season as an El Nino weather pattern also disrupts harvests in leading producers Brazil and India. Futures traded in New York jumped 9.3% last month, the most since October.

Some even expect the Thai crop to be closer to 90 million tonnes, Beydoun said, citing lower sugar content in the cane. The severe drought has reduced yields and hurt cane quality, Montri Vissanupornprasit, secretary general of the North Eastern Sugar Cane Planters Federation, said last month.

Buyers of Thai sugar for loading between May and July were willing to pay a premium of 0.95 cent to 1 cent over New York futures, Swiss Sugar Brokers said. That compares with 0.7 cent to 0.8 cent a week ago, data from the company showed.

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