Traders said the option of making deliveries at CSCE would become more attractive if the CSCE March/May spread widened, and the FOB March premium increased significantly against that for May. Thai sugar premiums for January/March shipment weakened to around 25 points (100 points=1 U.S. cent) over respective CSCE futures contracts against 30 points on Monday.

March/May premiums were largely unchanged at around 25 points, while offers for May/July shipment, which were not quoted on Monday, stood at around 55 points.Traders in Tokyo, however, said the current weakness in premiums partly reflected the fact that Thai millers' were desperate for cash. Some Thai millers, who have financing difficulties due to the economic downturn, want to sell as promptly as possible so they can receive cash immediately, they said. "If they (Thai millers) could afford it, they would wait a bit longer since premiums are a bit higher in May and July and New York futures prices are also nearing a floor," the trading house trader said. On prices for Brazilian sugar, some traders said that although they were still lower than Thai sugar, it was unlikely that prices would weaken much further. On the domestic market, traders said the pace of purchases by Japanese refiners had been slow compared with last year.

Business is centred on the April-June quarter at the moment, but by February last year, refiners were already making purchases for May/July shipment, they said.

"Our customers had a bad experience last year when they saw premiums tumble(after making purchases), so this year they are delaying buying as much as possible," said another trader. "People are more worried about deflationary pressures rather than tightening supply," he added. Japanese refiners have stayed on the sidelines for the most part in recent weeks, but some have purchased Cuban raws through Tokyo's sugar futures market, traders said.

They added that Japanese imports of raw sugar in 1999 were likely to fall below last year's 1.5 million tonnes.