Increasingly tight white sugar supplies early in 2016, as well as buoyant Chinese physical demand and a very poor EU sugar beet crop, are powering the premiums of white sugar prices over raw sugar to contract highs.
The spot whites-over-raws premium traded in excess of $90 per tonne on Wednesday, a comfortable profit margin for many sugar refineries around the world.
“This all suggests a shortage of whites for the first half of 2016,” said Nick Penney, senior trader with Sucden Financial Sugar.
He referred to sharply rising prices of white, crystal sugar in the domestic markets of the world’s leading producers, Brazil and India, meaning that it is more profitable for producers to sell domestically than to export.
Furthermore, Central America’s cane harvests got off to a slow start due to rainfall, and industrial sugar yields in number two exporter Thailand have been disappointing, traders said.
Michael McDougall, director of commodities at Societe Generale in New York, said buoyant Chinese physical demand for white sugar had propelled the whites premium higher.
“China appears to be not only importing record amounts of raw sugar (officially) in this season, but also appears to be sucking in white imports (unofficially) from Thailand and India through Vietnam and Myanmar,” he said in an email to the trade on Wednesday.
“The numbers are hard to come up with but the London (white sugar futures) market is telling us it appears to be significant.”
A senior European trader also referred to a strong flow of white sugar, typically coming from Thailand or India, into China via Myanmar.
The white sugar premium is also supported by the dismal EU beet crop, which could be the lowest in more than four decades, due to a smaller planted area and a drop in yields because of adverse weather.
EU white sugar exports are expected to be sharply down after the abysmal harvest, traders said.
“Tightness in the near term on the whites may be suggesting, as it usually does, future overall strength in the market,” Penney said in a note.