Excessive Sugar production in the Philippines needs to export thousand tons

Philippines may export 200,000T sugar on top of US quota

·        35,892 tons raw sugar for prompt shipment to Japan & Indonesia

·        US quota allocation for the Philippines raised by 18,892 tons

·        Says 2010-11 raw sugar output seen highest in 3 years

The Philippines says it can export up to 200,000 tons of raw sugar this year on top of its US quota commitments, but it may not have a lasting impact on global prices as the shipments will only partly offset expected crop losses in Brazil.

The Southeast Asian country would start selling raw sugar this month to Japan and Indonesia, with committed shipments of 35,892 tonnes, Rosemarie Gumera, manager at the policy and planning unit of the state agency Sugar Regulatory Administration (SRA), told Reuters.

The exports will be the Philippines’ first to markets other than the United States since the 2007-2008 crop year, made possible by an expected three-year high in domestic output.

The initial reaction was to dampen strong Asian prices, with premiums for J-spec, or low-quality Thai raws for the Japanese market, dropping to 180 points above New York futures from 500 points last week after the Philippines began selling its sweetener, dealers said.

But the Philippines’ exports alone may not have much of a global impact, as the market is worried about the magnitude of output decline in Brazil, the world’s No.1 sugar producer.

“(The volume) certainly is not to be sneezed at — a couple of hundred thousand tonnes — but it’s not, in my view, going to be something that will fundamentally change the course of the market,” said Luke Mathews, a commodity strategist with Commonwealth Bank of Australia in Sydney.

“It’s likely to be dwarfed by the production and export losses that are being experienced in Brazil.”

In the physical market, premiums for the widely-traded high polarisation, or hipol Thai raw sugar, were steady at 250 points above New York futures, also suggesting that some sellers were not too concerned about sales from the Phillipines.

The international sugar market is awaiting a forecast on centre-south output from Brazilian cane industry group Unica, due for release on Wednesday and looks certain to be cut from the previous estimate in March.

For the Philippines, sugar exports will also prevent domestic prices from further declining, easing the pain of local producers still reeling from the dramatic drop in prices from record highs hit in late 2010.

“A total of 35,892 tonnes are ready for shipment and the destinations are Japan and Indonesia. That’s already a commitment,” Gumera said. “But most probably we can sell as much as 200,000 tonnes this year.”

Indonesia is Southeast Asia’s largest sugar consumer.

On Tuesday, the Philippine government announced the country’s quota allocation to the US in the current crop year ending August was raised by 18,824 tonnes to 212,509 tonnes, the second increase in the quota this year.

“Certainly the announcement by the Philippines of more than 35,000 tonnes of exports does signal that the market is at levels which are attractive for sellers,” Mathews said.

Bumper harvest: The Philippines’ sugar output in 2010-11 (Sept-Aug) has outpaced annual demand of 2.2 million tonnes, with production at 2.36 million tonnes as of June 26, SRA data showed.

“We estimate total output this crop year to reach 2.4 million tonnes,” said Archimedes Amarra, executive director of the Philippine Sugar Millers Association and SRA board director.

That would be the highest since crop year 2007-08 when the Philippines’ output reached 2.455 million tonnes.

Amarra said producers wanted deals with other potential buyers such as China — the world’s third-largest sugar consumer — Malaysia, and South Korea, and big buyers outside Asia.

SRA officials said there was a chance the Philippines may sell sugar to countries in the Middle East. The Philippines had in the past exported sugar to the United Arab Emirates.

Amarra said it was “a little difficult to find a market” for Philippine sugar these days given the huge supplies available from major exporters.

“We are competing with Thailand which has a bumper harvest and is aggressive in marketing,” Amarra said.

Thailand, the world’s second-biggest exporter after Brazil, has a record 9.62 million tonnes of sugar in the current 2010-11 crop, of which around 7.0 million tonnes were expected to be available for export in 2011, also a record high.

Brazil is expected to add new sugar milling capacity slowly, in part due to high costs, signalling tightness in the sugar market in the medium term, a senior Rabobank analyst said.