Sugar Exports From Thailand Jumping 22% to Record on Demand

Feb 24, 2014 7:56 am ET

(Updates prices in fifth paragraph.)

Feb. 24 (Bloomberg) -- Sugar shipments from Thailand, the second-biggest exporter, will surge 22 percent to a record this year as output expands to an all-time high and Asian demand increases, according to the Office of the Cane and Sugar Board.

Exports will climb to 9 million metric tons this crop year, beating the 8.5 million tons estimated in December and last year’s 7.4 million tons, said Somsak Suwattiga, secretary- general of the state-run board. Output of sugar from the cane harvest now in progress will be as much as 11.5 million tons, more than 11 million tons estimated in December, he said. Sugar output was 10.02 million tons in 2012-2013, board figures show.

Rising Thai supplies may help to curb global prices that rallied from a 43-month low in January as drought in Brazil and the smallest crop in four years in India, the two biggest producers, trim a global surplus. While a plan by India to subsidize exports may take some sales from Thailand, it’s not a major concern as Thai shippers have regular trade partners, said Somsak. Indonesia and China are the region’s largest buyers, U.S. Department of Agriculture data show.

“Growing demand from Asia will absorb rising supplies from Thailand,” Somsak said by phone on Feb. 21. “Whatever we have left over from local consumption, we usually are able to sell it all, mostly to the sugar-deficit region in Asia.”

Raw sugar for May delivery rose as much as 2.4 percent to 17.48 cents a pound on ICE Futures U.S. today, the highest level for the most active contract since November. The sweetener, which fell for a third year in 2013, bottomed out at 14.7 cents on Jan. 28.

China’s Imports

Global demand is estimated to rise 2.2 percent to 173.7 million tons this season, driven by emerging-market consumption, according to Macquarie Group Ltd. China may boost imports to run refineries, helping to soak up a surplus that’s estimated to be 4.4 million tons, Macquarie said in a report on Feb. 18.

“We have been expecting Thailand to expand production because of the recent expansion in mill capacity, as well as greater cane area as farmers move out of rice,” Kona Haque, a London-based analyst at Macquarie, said in an e-mail. “Thailand is one of the few areas in the world where expansion will likely take place. So, overall we expect the global glut to narrow, despite the higher Thai output.”

Indian output may drop to the lowest in four years in the 12 months that started Oct. 1 after rains cut yields, according to the median of 12 trader, producer and analyst estimates compiled by Bloomberg. The Indian government plans to subsidize as much as 4 million tons of raw exports over two years in a decision criticized by producers in Brazil and Australia.

Export Markets

Thailand’s key markets are Indonesia, China and Malaysia, said Somsak. Imports by Indonesia, the world’s biggest buyer, will increase 3.6 percent to 3.7 million tons in 2013-2014, according to the USDA. Shipments into China will be 2.8 million tons, while Malaysia takes 1.9 million tons, USDA data show.

Thai cane production will rise for a fifth year this season to 115 million tons as low temperatures and adequate water supply improve yields, while some rice and cassava growers shift to the crop for better returns, Somsak said. One ton of cane yields an average 104.39 kilograms of sugar this season, from 93.79 kilograms last season, data from the office show.

“Cane and sugar production will continue to increase as the government encourages rice farmers to switch,” said Somsak, without providing estimates.

--Editors: Jake Lloyd-Smith, James Poole