You are here
Sugar exports from India seen doubling as bumper crop looms
[NEW DELHI] Sugar exports from India may double as farmers prepare to harvest the third-biggest crop ever, extending the country's surplus for a sixth year.
Shipments will be 2 million metric tons in the 12 months starting Oct 1, according to the median of six estimates from refiners, brokers and analysts compiled by Bloomberg. That compares with 700,000 tons to 800,000 tons this year, the Indian Sugar Mills Association says. Production will be 27.25 million tons from a record 28.4 million tons this year, estimates from eight survey participants show.
The glut in the world's second-largest producer threatens to extend a 35 per cent slump in New York futures in the past year. The decline in prices to the lowest since 2009 has forced the government to subsidise exports and waive interest on bank loans to processors. Stockpiles of 10 million tons will add to supplies and exceed demand of 25.5 million tons, the mills say. That may force producers to ship as much as possible.
"With high carryover stockpiles, you will again have a glut of 10 million tons next year and you will have to throw out the excess," Rahil Shaikh, director at ED&F Man Commodities India Pvt, said in Pune on June 19. "If the industry has to survive, they have to export."
Domestic prices have fallen below the cost of production to a seven-year low because of weak demand and mounting stockpiles, according to the mills. The cabinet approved interest-free loans of 60 billion rupees (US$943 million) this month to help mills clear 210 billion rupees owed to farmers. The government has pledged a subsidy of 4,000 rupees a ton for raw sugar exports as domestic rates are above global prices.
Arrears may decline before the start of the new crop. While the amounts owing were high in April last year when the mills finished crushing, they had decreased by the time the new season started in October. About 95 per cent of the crop is irrigated, countering concern that reduced monsoon rain may hurt output.
For now, shipments are not possible, said Pallavi Munankar, an analyst at Geofin Comtrade Ltd in Mumbai.
"Looking at the surplus stock in the world and lower prices prevailing in the international market, exports are not feasible," Ms Munankar said by e-mail on Wednesday. "This leaves the industry with no other alternative but to continue to hold huge stocks and incur losses."
Prices on the ICE Futures US fell to 11.52 cents a pound on June 19, the lowest level since January 2009. The contract for October delivery traded at 12.02 cents on Wednesday. Prices in Mumbai were at 2,230 rupees per 100 kilogrammes.
The area under cane in India dropped to 4.16 million hectares as of June 19, compared with 4.39 million hectares a year earlier, the Agriculture Ministry said last week. Exports reached 558,000 tons from October to May, the mills estimate.