Singapore — Thai raw sugar cash premiums spiked to a historic high of 223 points over New York No. 11 May futures for May 1 to July 15 shipment window, up 28% on the day, since S&P Global Platts first started assessing Thai HiPol premiums on October 5, 2015.
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The cash premiums were driven higher by the Quota B tender results Tuesday, with all three positions awarded to Wilmar.
Comparing the current Quota B tender results to the previous tender on December 4, Thai raw sugar cash premiums have already strengthened by over 150%.
Quota B tender results
The fourth Thai Quota B tender for the 2019/2020 season (October-September) for 49,333 mt of HiPol raw sugar for May 1 to July 15 shipment and 24,000 mt of HiPol sugar for July 1 to September 15 shipment was awarded at premiums of 223 points over New York No. 11 May futures and 259 points over July futures Tuesday.
Traders expressed surprise on the tender results as the next highest bids for both HiPol May 1 to July 15 and July 1 to September 15 shipment were between 42 to 68 points apart from the winning bid.
Another 14,123 mt of J-Spec raw sugar for July 1 to September 15 shipment was awarded at 243 points over the July futures.
The Quota B tender, which covers 400,000 mt of raw sugar contracts for the season, is issued by several trading houses and sold on behalf of the Thai Cane and Sugar Corp, which has overall responsibility for pricing and selling raw sugar under this quota.
Half of the amount is allocated to international sugar brokers and the other half to local millers for export.
Cane production estimates edge lower
Cane production estimates for the 2019/2020 Thai sugar crop has seen a declining trend amid dry weather conditions for most part of 2019.
Over December 1-January 31, the total cane crush was 51 million mt with sugar production at 5.3 million mt, down 15% and 12% on the year respectively, data from the Office of the Cane and Sugar Board showed.
Trade houses have forecast total sugarcane production to be lower at around 82-100 million mt, compared to previous estimates of between 100-110 million on December 4.
Tighter supplies as mills hold back sales
Adding to the strength in sugar cash premiums, Thai mills have also halted sugar sales since the start of 2020 as they were reluctant to overcommit on their position in view of the tighter crop situation.
The shortage of sugar in the market has led several trade houses to pick up sugar cargoes from the inter-trade market, thus pushing up Thai raw sugar cash premiums by over 130% since January 1.
"We are waiting to get a clearer picture on the cane crush before contracting to sell. The crush will likely end in March so we will have some [selling] ideas by late February," a source from the Thai mill said.