BEIJING: A collapse in China’s sugar production is igniting business for Thai millers, drawing down stockpiles and setting the stage for a recovery in prices.
Dry weather and a decline in sugarcane planting means China next season will produce its least amount of sweetener in a decade, according to researcher Green Pool Commodity Specialists. That’s a big opportunity for Thailand. The world’s second-largest exporter shipped four times as much white sugar to China this year through Aug 21, data from the Bangkok-based Office of the Cane and Sugar Board showed.
Trading houses and funds are reversing bearish bets on sugar as Thai refining reduces stockpiles of the sweetener, according to independent soft commodities trader Group Sopex. Global inventories that expanded during a five-year glut are expected to fall this year and the spread between US futures contracts has tightened, a sign of restricted supply.
“The effective flow of Thai white sugar into China is what is changing the market outlook,” said John Stansfield, a London-based analyst at Group Sopex, who has followed the market for more than 20 years. “It all boils down to a poor crop in China and the prospect of an even worse one to come.”
