Singapore, Oct 24 - Fears that buyers will default on sugar shipments are worrying sellers in Thailand, Asia's largest exporter, while the arrival of more raws is causing stocks to pile up in neighbouring Indonesia.
Premiums for Thai sugar slipped to 120 points over New York futures from 135 last week in thin trade, on fears a tumbling U.S. sugar market and the global liquidity crisis could force buyers to delay or cancel purchases, dealers said on Friday.
"We see there have been some problems with payment at this moment. Some buyers are struggling with financial problems," said a dealer in Bangkok.
New York's March raw sugar contract fell 0.12 cent to end at 10.84 cents per lb on Thursday, the lowest close for a spot month since mid-June, on worries over a looming global recession. The contract has dropped more than 20 percent so far this month.
Though there have been no defaults on sugar shipments so far, many exporters are nervous. Already, buyers are delaying rubber and rice purchases from other Thai sellers after a drop in prices in the international markets.
Thailand exports sugar to Indonesia, Japan, Taiwan, the Middle East and Europe.
"One of my Russian customers told me they can't get financial support from their bank. The global financial crisis already has its impact," said another Bangkok dealer.
Soft commodities have been hit by fund selling on worries a global recession could cut demand for coffee, cocoa, sugar and rubber.
London's December white sugar fell $4.00 to end at $309.60 a tonne on Thursday, its weakest since late 2007.
While fears of defaults gripped Thailand, refined sugar stocks held by Indonesia's state plantations and trading houses reached 300,000 tonnes as of Oct. 10, which is 10 times higher than the amount recorded at the same period last year.
At least 50,000 tonnes of raw sugar from Australia were being unloaded in West Java this week, from the 1.41 million tonnes of raw sugar already contracted for import in 2008. About 1 million tonnes of raw sugar have already arrived in Indonesia.
"The cargo is being unloaded in Cigading port. I guess stocks in Indonesia are more than enough. Traders have plenty of sugar but it's difficult to sell it," said a dealer in Jakarta.
Due to the ample supplies, farmers have been forced to cut sugar prices to 4,800 rupiah a kg ($0.48) due to ample supplies. It was below government-set farmgate price, or the price paid to farmers, at 5,000 rupiah a kg.
"The fall in prices is related to the ongoing increases in sugar stocks held by producers," said Agus Pakpahan, a deputy minister of the enterprise ministry.
Indonesia's sugar stocks were estimated at more than 1 million tonnes, enough for five months of consumption, as the crushing season progressed in the main producing islands of Java and Sumatra.
In Australia, the sugar cane harvest is now more than 78 percent complete, and dealers said they expected a falling Australian dollar to help offset declines in global sugar prices.
"While sugar has been caught up in the market flux - facing extraordinary daily price movements, the Australian dollar downturn has helped mitigate the effect of these violent movements," said Canegrowers chief executive Ian Ballantyne.
"The sugar price retreat has been offset to some degree, but by no means totally, by the weakening Aussie dollar."
Australia sugar production is forecast at 4.9 million tonnes in 2008/09, down slightly from the previous year due to dry weather, said the U.S. agricultural attache in Canberra in a report this month. [ID:nN01524240] ($1=10,005 rupiah) (With reporting by Bruce Hextall in Sydney, Yayat Supriatna in Jakarta and Apornrath Phoonphongphiphat in Bangkok, ($1=9,950 rupiah)