by Agrimoney.com
"Aggressive" buying by China, in the face of a domestic supply squeeze, could come to the aid of sugar futures, which looked set to extend their losses on Monday after hefty losses against an expiring contract.
Futures in the sweetener lost more than 1% on both sides of the Atlantic, paring early gains, after the London futures exchange confirmed deliveries of 375,150 tonnes against the expiring May white sugar contract.
The figure, equivalent to 7,500 lots, compares with, for instance, the 126,500 delivered against the December contract.
The decline was also attributed to a reduction by Standard & Poor's, to negative from stable, on its outlook for America's credit rating, signalling a downgrade may be in the offing, and against a continuing backdrop of optimism over production from Thailand, the second-ranked sugar exporter.
Thai production was on Monday estimated at a record 9.0m tonnes, leaving sufficient capacity for exports at an all-time high of some 6.2m tonnes.
"The Thai crush continues to go from strength-to-strength," Luke Mathews at Commonwealth Bank of Australia said.
'Pent-up demand'
However, the fall in sugar prices on futures markets, and in the cash market in Brazil, the top exporting country, has not been echoed in China, the second-ranked consuming country, which has suffered successive seasons of disappointing output.
Prices in some provinces have now topped 50 cents a pound, despite efforts by authorities to cool the market by releasing supplies from state reserves, most recently in February, when more than 150,000 tonnes were sold, at an average price of 7,423 yuan a tonne, equivalent to about 51 cents a pound.
"Market conditions look to be evolving where China is likely to buy sugar aggressively from major importers over the next six months," Australia & New Zealand Bank said, terming China's sugar supply "clearly an issue".
"With China in strong need to replenish domestic supplies and ease the risk of further inflationary pressure from higher domestic sugar prices, China's pent-up demand for sugar imports is strong."
Critical gap
The extent of the buying "could be as high as 1.8m tonnes over three-to-four months, providing some support to global sugar prices through this period", ANZ added.
The comments follow a forecast from Societe Generale that China's sugar imports, which rose to 1.5m tonnes in 2009-10, could "soon increase dramatically", reaching 3m tonnes a year.
The bank noted that a discount of 20 cents a pound of New York futures prices compared with Chinese futures prices triggered buying in the second half of 2010.
'Risk premium'
Separately, Rabobank lowered to 26.0 cents a pound, from 29.0 cents a pound, its forecast for New York sugar prices in the April-to-June quarter.
While highlighting improved hopes for crops in Brazil and Thailand, the bank said that price falls would be "tempered" by weather worries for the northern hemisphere beet harvest.
"A risk premium is likely to remain in the market at least until the beet harvest this fall, as the sugar market still remains just one major weather stock away from a significant deficit," Rabobank said.
Sugar for May stood 2.1% lower at 24.07 cents a pound in New York at 15:00 GMT, with London's August white sugar contract, fresh in the spot position, stood down 1.7% at $622.00 a tonne, the weakest for a near-term lot for six months.
No comments:
Post a Comment