FEBRUARY 18 Bid Results: Vicmico A = rejected & B = P1,723.40; Biscom A = P1,688.58, B = P1,685 & molasses = P8,100; Sagay & Lopez A = P1,688; B = P1,724 & molasses = P8,035; Passi A = P1,692.33 & B = P1,630; & CASA A = P1,692.33 & B = P1,750.
February 12 Bid Results: Vicmico A = P1,712.30 & B = P1,880; HPCo A = P1,706, B = P1,935 & molasses = P8,120; Sagay & Lopez A = P1,712.30 & B = P1,880; BISCOM A = P1,703.88, B = P1,812.05 & molasses = P8,278; Sonedco A = P1,670.58, B = P1,980 & molasses = P8,200.
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In last Friday’s column, Cane Points cited reports that world sugar prices, both raw and refined, dipped. Raw-sugar futures for May delivery fell to US 25.57 cents a pound (P1,293 per 50-kilo bag @ P45.98/$) on ICE Futures in New York last February 17. White sugar for May delivery also slid to $714 a metric ton (P1,641/LKg) on the London Futures Exchange on the same day.
Raw sugar futures in last Friday’s trading slightly improved. Raw sugar for May delivery closed at US 25.96 cents a pound (P1,322 per 50-kilo bag @ P46.28/$) on ICE Futures in New York last February 19. On the other hand, white sugar for May delivery slid further to $706.30 a metric ton (P1,634/LKg) on the London Futures Exchange on the same day.
Not surprisingly, domestic prices in last week’s bidding reflected the trend in the world market. Of course, the forthcoming sugar importation was also a major factor which pushed down domestic millgate prices.
The dip in world prices was attributed by commodities experts to the reluctance of India and Pakistan to import plus the expected favorable harvest in India’s biggest sugar-growing region of Uttar Pradesh and next week’s Brazil harvest.
India needs to import an additional 2.5 to 3 million MT to fill its 7 million deficit this crop year. It bought 200,000 MT at the start of this month but it had stayed off the market since then.
Aside from lifting import tariffs, the Indian government keeps a hands-off policy in importation. It is the millers who import the sugar.
Indian millers are hesitant to import because of the drop in domestic prices. They fear that with the relatively high world market prices, the landed cost of imported sugar will be higher than domestic prices.
From a high of P2,024/LKg on January 8, millgate prices in India recently dropped to P1,740. If freight, importation, handling and costs are factored in, imported sugar cannot compete with domestic prices.
The problem is that there is a very low supply of domestic sugar. With the onset of the major Indian festival of Holi (Festival of Colours) on March 1 which lasts up to 16 days in some parts of the country, domestic sugar supplies will indeed be strained.
“Global prices need to drop or local prices need to rally,” said Yatin Wadhana, managing director of sugar broker Sucden India.
The delay in imports will worsen the domestic sugar shortage and push up domestic prices. Government is getting apprehensive as the sugar price time bomb ticks off.
Government should take the initiative to start the process of buying and take urgent steps to import sugar, warned India’s Economic Advisory Council in a report to Prime Minister Manmohan Singh last Friday.
“Even if there is some reduction in demand on account of high prices, the clear implication is that the stock position will rapidly approach the nil level even before the festival season begins,” the report stated.
Fresh production in India will become available only in late November. There is no choice but to import - and to import soon.
Once India returns to the market, world prices will again most likely pick up despite Brazil’s impending harvest.
Pakistan, Asia’s third largest consumer, bought 50,000 MT of refined sugar last week, lesser than the 200,000 MT that it wanted to buy because of price and supply issues with the winning bidder. It will return to the market on March 6 for 200,000 MT refined sugar. To plug its domestic supply gap, Pakistan needs to import 1.2 million MT – 500,000 MT by June and 700,000 MT by July.
Sooner than later, India and Pakistan will return to the world sugar market for their immediate requirements. The US Sugar Policy Alliance, consisting of sweetener users including Hershey’s, Krafts and General Mills, has been badgering the USDA for additional sugar imports.
Egypt and most Middle East countries, Mexico and Russia, Indonesia, the Philippines and China have all declared their intention to import sugar either to fill domestic supply deficits or to buffer their stockpiles before the next milling season begins.
Where will they source their immediate sugar requirements?
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Mr. Jaime G. Golez celebrates his birthday February 23. Cane Points joins the Golez Family and friends in wishing him many more fruitful and happy years to come. Happy birthday, Sir Jimmy!
(For reactions and suggestions, email bbacaoco@yahoo.com.)