"We are not selling. We have sold about 80 percent of the sugar we expect to produce," said one official at one large mill.
The government says the harvest may be almost 30 percent lower in the year ending Sep. 30 than in the previous year.
"We are now talking about 48 or 49 million tonnes of cane. Drought hit the crop severely," said Boonthin Kotesiri, a director at the Thai Cane and Sugar Board.
Thailand, whose major buyers are Japan, South Korea, Taiwan, Indonesia and Malaysia, produced 64.48 million tonnes of cane in the previous crop year.
Last year, Thailand shipped 4.6 million tonnes of sugar. This year, traders expect exports to drop to 3 million tonnes.
"Thai exporters are estimated to have no more than 500,000 tonnes left unsold this year," said one.
The persistent drought is expected to hit the next crop because it prevented farmers from planting for almost 4 months, traders said.
But sugar premiums could hold recent gains despite weak overseas demand in quiet trade this week, traders said.
"Low supply is expected to keep Thai premiums steady," said one.
In the secondary market, Thai 100 ICUMSA white sugar for May-June was offered at $35 over London prices with bids at $33 over on Monday, traders said.
It was offered at $30 over last week with bids only $25.
ICUMSA measures the colour of sugar and the lower the ICUMSA level, the higher the degree of whiteness. ICUMSA 100 is considered consumer-grade sugar.
Thai traders said they were keeping a close eye on Indonesia amid talk in the market that Indonesian firm PTPN X may hold a tender, possibly on Tuesday, to buy 15,000 tonnes of white sugar.
The traders said they did not expect demand from Pakistan.
"Pakistan is highly likely to buy white sugar from Dubai. Its prices are much more competitive than the Thai sugar," said one.
Pakistan has booked more than 200,000 tonnes of raw and refined sugar for February and April shipment and traders in Asia said last week it would finalise deals soon to buy around 120,000 tonnes of white sugar.
It costs about $11 to ship one tonne of sugar to Pakistan from Dubai, but almost 6 times more to ship it from Thailand, traders said.
Several vessels have arrived in Thailand to take sugar this week, most of its destined for Indonesia and Japan, shippers said.
Most of Thailand's 46 mills are expected to wrap up crushing by the middle of March, about a month earlier than usual due to the smaller crop, mills said. Crushing began on November 23.