Sugar export from India seen doubling as bumper harvest looms

New Delhi/Mumbai: 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 1 October , 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% slump in New York futures in the past year. The decline in prices to the lowest since 2009 has forced the government to subsidize 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 will 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 19 June. “If the industry has to survive, they have to export.”

Export subsidy

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 Rs6,000 crore ($943 million) this month to help mills clear Rs21,000 crore owed to farmers. The government has pledged a subsidy of Rs4,000 a ton for raw sugar exports as domestic rates are above global prices.

“Looking at the surplus stock in the world and lower prices prevailing in the international market, exports are not feasible” now, said Pallavi Munankar, analyst at Geofin Comtrade. “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 19 June, the lowest level since January 2009. The contract for October delivery traded at 12.02 cents on Wednesday. Prices in Mumbai were at Rs2,230 per 100 kilograms (220 pounds).

The area under cane in India dropped to 4.16 million hectares as of 19 June, 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. Bloomberg

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.