Government approves sugar exports for first time since 2009

ISLAMABAD/DUBAI: Pakistan has approved the export of sugar for the first time in nearly three years, spurred by an expected surplus of more than 1 million tonnes, but the move is unlikely to affect the global market, which has priced in rising output in other countries.

Pakistan was forced to import about 1.2 million tonnes of sugar in 2010 after production fell to 3.1 million tonnes from the 2009/10 crop year, when many farmers switched to more profitable crops.

“The government has approved the export of 100,000 tonnes of sugar, but the modalities of export have not been worked out yet,” Khizer Hayat, a spokesman of the state-run Trading Corporation of Pakistan, told Reuters, referring to white sugar.

“We are waiting to see if it will be done through private channels or by government corporations.”

Last year, Pakistani millers sought permission from the government to export up to 500,000 tonnes of refined sugar because of expectations of a bumper crop, which could exceed 5 million tonnes.

“We expect the sugar surplus to be 1.5 million tonnes, given the current domestic consumption,” a Ministry of Commerce official, who wished to remained anonymous, told Reuters.

Trade sources, speaking to Reuters on the sidelines of the Kingsman sugar conference in Dubai, said Pakistan may decide to allow a further 300,000 to 500,000 tonnes of exports later, while most of the 100,000 tonnes of whites would be shipped to Afghanistan.

“It has come as a surprise that Pakistan has so much sugar,” Jonathan Kingsman, Managing Director of consultancy Kingsman SA, told Reuters.

“They (Pakistanis) will be willing to chase sugar prices lower to be able to place that sugar into the export market. If their production is as good as it seems to be, they could export 500,000 tonnes.”

Trade sources at the Kingsman conference estimated that Pakistan’s 2011/12 sugar production was between 4.5 million and 5.1 million tonnes, while annual domestic sugar consumption was seen at 4.2 million tonnes.

But analysts said global sugar prices were expected to be steady at current levels as the market factored in more supply from India, Brazil and Thailand.

India, the world’s number 2 sugar producer after Brazil, has a sugar surplus of 3 million to 4 million tonnes available for export in 2011/12.

India, which had allowed 1.5 million tonnes of exports under a scheme called Open General Licence (OGL) in the 2010/11 crop year ending September, recently issued a formal order for unrestricted exports of 1 million tonnes.

“I think short-term, basically I am looking at sugar to be trading in a range. I mean, for the short term, prices could be pressured because of the (global) surplus, but longer-term, I think, prices should be quite stable,” said Lynette Tan, an analyst with Phillip Futures in Singapore.

“Sugar is a very important commodity. You can see some of the governments probably even going into stockpiling programmes.”

March raw sugar futures on ICE rose 0.46 cent to end at 23.94 cents per lb on Friday after Labor Department data showed the US economy created jobs at the fastest pace in nine months in January, far outstripping analysts’ expectations.

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Stocks rise as U.S. jobs gain outweighs fears over Greece

Asian shares rose on Monday as surprisingly robust U.S. jobs data bolstered investor risk appetite, overshadowing worries about a lack of progress in Greek debt restructuring talks that are vital to containing the euro zone debt crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent to its highest in more than five months, after the index recorded a fifth successive weekly gain last week.

Japan’s Nikkei average opened up 1.2 percent.

Major stock indexes closed on Friday at multi-month highs, as sentiment was bolstered by U.S. job creation which far exceeded expectations last month and a surprise acceleration in the U.S. services sector to its highest in nearly a year.

In the euro zone, the private sector economy expanded in January for the first time since August, raising hopes the region could avoid a recession.

But Greece remained a drag as a number of major conditions demanded by the “Troika”, representing Greece’s European Union, European Central Bank and IMF lenders, were still outstanding.

Athens must tell the EU by Monday whether they accept the stern terms of a new bailout deal. Without the deal, Athens would head for a disorderly default.

“It’s a mixed bag really. Until Greece is resolved, it’s hard to get too unambiguously bullish on the back of better U.S. news and liquidity from Europe,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investments Asia Pacific.

“It’s hard to see any solution to Greece that doesn’t involve some form of default,” he said, adding that while the uncertainty over the Greek issue remains a source of volatility, an event risk would be “a known unknown” and not a surprise.

The euro was down 0.2 percent at $1.3127.

Latest figures dated Jan. 31 showed investors reduced their short positions in the euro last week, after five weeks of selling, but the market is still significantly short of the single currency.

TECHNICALS EYED

EPFR Global data underscored investor appetite for higher returns, with flows into Emerging Market Equity Funds hitting a 43-week high in the week ended Feb. 1. EPFR Global-tracked Bond Funds saw inflows of a net $7.47 billion during the same period for the biggest weekly total since it started tracking them about 10 years ago.

“A strong U.S. employment report fueled the risk rally further, and some investors now wonder whether it is overextended. We think it is advanced, which means selectivity is warranted, but not over,” Barclays Capital said in a note.

“We see value in EM assets, including currencies. EM carry trades are supported by global central banks, growth differentials, the fading risk of a hard landing in China, clean balance sheets and positioning,” it said.

After the rally late last week, many markets were nearing key resistance, which could signal a pullback.

The CBOE Volatility index VIX, which measures expected volatility in the S&P 500 over the next 30 days, closed at a seven-month low of 17.10 on Friday, reflecting improved market sentiment and receding fears of sharp market falls.

A move to the support zone around 14-15 suggested increased volatility in coming sessions.

Spot gold inched up 0.3 percent to $1,730 an ounce after falling 1 percent on Friday when the jobs data dashed hopes for more stimulus from the Federal Reserve, which had been priced into bullion’s recent rally.

Asian credit markets firmed, with spreads on the iTraxx Asia ex-Japan investment grade index tightening sharply by about 10 basis points early on Monday.

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