Bloomberg News

Thailand Heading for Second Record Sugar Crop May Curb Prices

June 22, 2011

June 22 (Bloomberg) -- Thailand, the world’s second-biggest sugar exporter, is poised for its second straight year of record production and shipments, helping curb prices that have advanced 26 percent in less than seven weeks.

Output may climb to 10 million metric tons and exports to 7.5 million tons from the crop that starts in November, said Parin Amatyakul, vice president of Mitr Phol Sugar Corp., the largest miller in Thailand. That’s up 4.2 percent and 7.1 percent from 9.6 million tons and 7 million tons this year.

Increasing supplies may cap an advance in prices that have surged 63 percent in the past year, potentially helping Nestle SA, the world’s biggest food company, trim the $1.7 billion it spends annually on the sweetener. A higher crop may also contribute to limiting global food costs that the United Nations estimates climbed to a record in February.

“It will put pressure on prices,” Naim Beydoun, an analyst at Swiss Sugar Brokers in Rolle, Switzerland, said in an phone interview. A widening global surplus may push New York prices down by 15 percent to 22 cents a pound in July, said Beydoun, 52, who has traded the sweetener since 1985.

Global supplies will outpace demand by 10.3 million tons next season, reversing a shortage of 500,000 tons this year, as producers respond to high prices, according to C. Czarnikow Sugar Futures Ltd. Production will increase 14.2 million tons to a record 182.2 million tons, the broker said on June 3.

Bumper Crop

“We will have another bumper crop as farmers have increased plantings,” Prasert Tapaneeyangkul, the secretary- general of the Office of the Cane & Sugar Board, said in an interview yesterday. “Rice and cassava producers have shifted to cane because of better returns.”

The cane harvest in Thailand may increase 5.7 percent to a record 105.1 million tons in the year from November as planted area gains by 2.6 percent to 8.37 million rai (1.3 million hectares), according to the Office of Agricultural Economics.

Congestion at ports in Brazil, the world’s biggest exporter, has contributed to price gains. As of June 9, as many as 68 vessels were lined up at two Brazilian ports, according to the shipping agency Williams Servicos Maritimos Ltda.

Ports in Thailand are also suffering delays. Vessels are waiting to load as much as 900,000 tons, about 13 percent of this year’s supply, said Piromsak Sasunee, chief executive officer of Thai Sugar Trading Corp., the largest shipper. A lack of labor and a shortage of lighters to carry the cargo to waiting vessels have contributed to the delays, he said.

‘Grievous Problem’

“It’s a grievous problem,” said Prasong Serisathien, 62, general manager of Siam Sugar Export Co., the second-biggest exporter. “Problems next year could be worse,” said Prasong, who has been in the industry since 1971.

Increasing global supplies may help Vevey, Switzerland- based Nestle, which said on June 8 its raw-materials bill may rise by as much as 3 billion Swiss francs ($3.6 billion) this year, the most ever. The company, whose brands include Smarties and Aero, spends about 1.5 billion Swiss francs a year on sugar.

Raw sugar for October delivery lost 1.3 percent to 25.93 cents a pound on ICE Futures U.S. in New York today.

--With reporting by Lucia Kassai in Sao Paulo. Editors: James Poole, Ovais Subhani

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at

To contact the editor responsible for this story: James Poole at

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