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BANGKOK (Dow Jones)--World sugar price won't change very much in the
next six months until the world sees a clearer picture of Brazil's
sugarcane crop, Thailand's sugar export company KSL Export Trading Co.
said.
The sugar market's fundamentals will ensure that the world price
will move in a narrow range in the first half of the year, KSL's
Managing Director Pichai Kanivichaporn told Dow Jones Newswires in a
recent interview.
"Personally, I think world sugar price will move around the
current levels, ranging between 8 to 10.5 (U.S.) cents (a
pound)," Pichai said, referring to the world raw sugar futures
price on the New York's Coffee, Sugar & Cocoa Exchange.
"However, price could change in July when the market sees a
clearer picture of the 2001-2002 sugarcane crop from Western
Hemisphere, especially those in Brazil," he added.
On the CSCE, raw sugar futures' front-month May contract ended
slightly lower by 0.03 cent to 8.73 cents a pound Wednesday on selling
from locals and small speculators.
KSL's Pichai is widely known as the sugar expert in Thailand's
sugar industry.
KSL controls and exports sugar from four sugar mills - New Kwang
Soon Lee Sugar Factory Co. Ltd., New Krung Thai Sugar Factory Co.
Ltd., Thamaka Sugar Industry Co. Ltd., and Khon Kaen Sugar Ind. Co.
Ltd. KSL and the four mills are under the management of Thailand's
Chinthammit family.
"If the market sees healthy and larger-than-expected sugarcane
production from Brazil, world sugar price could fall to a level lower
than 8 cents a pound," Pichai said.
Many sugar mills in Thailand will only be profitable when world raw
sugar price is above 8 cents a pound.
Brazil Sugarcane Crop May Be Lower Than Expected
After a drought and bouts of frost that have sliced Brazil's
2000-2001 sugarcane crop heavily, most forecasts see sugarcane output
rebounding in 2001-2002 crop year. Brazil's crop year runs from May to
April.
But current sunny days and unusually dry weather are starting to
cast some doubts on the expected recovery this year of Brazil's cane
harvest.
The 2001-2002 sugarcane output from Brazil's main belt in the
Central-South region is now expected to increase by 7.1% from 207.5
million tons in previous crop, versus a previous estimate in January
of 10%, according to a local forecaster known only as Datagro.
A recovery in another planting area, the North-Northeast region, is
still pegged at 3% from 51 million tons expected in 2000-2001, Datagro
said.
The Central-South region produces about 85% of the nation's total
sugarcane production and the North-Northeast churns out the remainder.
Pichai said world and Thai sugar prices will be fairly supported by
China's purchases, expected to start in the second quarter of the
year.
He said China is likely to import around 1 million tons of sugar
this crop year and will start buying the first tranche in the second
quarter of this year, but the sugar will come from its contracted
supplier Cuba.
"After securing sugar in the second quarter, China will wait
until June, when it is expected to see a clearer direction for world
sugar prices," Pichai said, adding that China will wait until
sugar price falls further.
Many market participants, however, believe China will start buying
the commodity in the second half of the year in view of the
availability of sugar from the domestic market.
Thai Crop Forecast At 48 Million-50 Million Tons
Pichai said world sugar price could be further supported in the
last quarter of the year if Thai 2001-2002 crops remain infested by
pests and diseases.
White leaf disease emerged early last year and the outbreak of
maggot infestation severely affected sugarcane fields, especially in
the largest planting area in the Northeast region, causing overall
output to fall.
Thailand's sugar crop runs October through September. Sugarcane
production from 2000-2001 crop year is currently forecast by market
participants around 48 million-50 million tons, down from an official
forecast of 52.08 million tons made late last year.
Consequently, sugar mills under the KSL group are also expected to
crush just slightly higher than 5 million tons of sugarcane during the
2000-2001 crushing season, down from an initial target of 5.5 million
tons and down from around 6 million tons they crushed in the previous
season, Pichai said.
"The maggot infestation is now still worrisome. If the maggot
problem is prolonged until the next crop, sugar price would be
supported from the expected smaller supply," Pichai said, noting
that smaller supply won't be welcomed by mills.
The mills are set to complete their crushing operation later in
March. Combined sugar production from the four mills is expected
around 400,000-500,000 tons, Pichai said.
KSL exported 423,036 tons of sugar from its four mills during
calendar year of 2000, valued at 2.76 billion baht ($1=THB43.554),
according to figures from the state's Office of the Cane and Sugar
Board.
Pichai said, however, he can't predict the group's sales earnings
this year because "it's difficult to predict export value,"
which vary according to world sugar price.
In addition, Pichai said KSL hasn't made much forward sales so far. |