Strong Prices Trim Back Brazilian Sugar Trade

SAO PAULO,("Strong Prices Trim Back Brazilian Sugar Trade," published around 17:25 EDT on 06 May 2009, incorrectly reported that India had bought two million tons from Brazil, in the 13th paragraph. India bought two million tons of sugar, of which 600,000 tons came from Brazil. A corrected version of the story follows.)

Robust international sugar prices are discouraging some sugar buyers, although trade remains steady, industry participants said Wednesday.

The ICE Futures U.S. July sugar contract in New York closed up 21 points at 15.36 cents Wednesday amid buying from both funds and speculators.
Wednesday's intraday high of 15.41 cents was the highest level since August 2008.

Industry participants said physical sugar buying has continued during the week, especially from the Middle East, but high sugar prices kept some buyers out of the market.

Stefan Uhlenbrock, a senior commodity analyst at F.O. Licht, said high prices are, for example, leading to slower trade with India.

"This is likely to be a temporary pause and India will need to buy more sugar in the future whether prices go up or down," he said.

Although India will continue to be the big story in the market, having switched from an exporter to an importer, other smaller markets can also provide destinations for Brazil's raw sugar.

Pakistan, Iran and Indonesia also need to buy more sugar and current freight rates make raw sugar shipments to Asia feasible, Uhlenbrock said. Pakistan - with a weak crop this year - has a deficit of between 400,000 metric tons and 700,000 tons of sugar and will need to import, he said.

F.O. Licht expects Brazil to export 26.5 million tons of sugar from the new 2009-10 crop against 21.8 million tons in 2008-09.

Brazil exported 964,400 tons of raw sugar and 335,700 tons of crystal white sugar, or refined sugar, in April compared to 865,200 tons of raw sugar and 432,400 tons of refined sugar in March, according to the Foreign Trade Ministry this week.

Uhlenbrock said the current sugar price of 15 cents per pound is realistic. Prices could continue at this level for the rest of the month, he said.

Despite the high sugar prices, most sugar is finding destinations in places such as the Middle East, said Alex Oliveira, a sugar broker at Newedge USA in New York.
A market analyst at F.C. Stone also said India has a demand for around three million tons of sugar and has already bought around two million tons. Some 600,000 tons were already bought by India from Brazil, according to the market, the analyst said.
Russia is also likely to import around 400,000 tons of raw sugar after changing its import tariffs, she said.

A broker at Uniao Corretora said that, for very high polarization sugar, or VHP, sellers were asking for prices on par with the May contract in New York. Buyers wanted 15 points under the same nearby contract.

No clear buyers emerged this week, with the buyers being evenly spread out, he said.
In the domestic market, Brazilian white sugar sales have slowed with some buyers expecting prices to fall due to a larger cane crop, said the F.C. Stone analyst.
Brazil is the world's No.1 sugar producer.

source: (Dow Jones Commodities News via Comtex)