Sugar exporters await price rally in global markets

New Delhi: Indian sugar exporters are going slow on shipment in anticipation of better global prices ahead of Ramzan and concerns over a delay in Brazilian cane harvest.

India has exported 25 lakh tonne this year, of which 5 lakh tonne was shipped out in the last two months after exports were freed up. Shipments of around 5 lakh tonne are in the pipeline.

"Exporters not in a hurry. There is good demand from West Asia and African countries ahead of the Ramzan season. With tight global supplies due to the late arrival of Brazilian sugar, they are expecting a better realisation," said a food ministry official.

However, Indian Sugar Mills Association (ISMA), a sugar industry body, said exports were smooth in view of a tight global supply and a weak rupee. Global prices have risen from $550 per tonne in May -- when exports were freed up -- to $662 per tonne towards the closing of August delivery.

"Demand is pouring in at a brisk pace from Sri Lanka, Bangladesh and West Asia. With a surplus production, there is no supply constraint in domestic as well as global market," said Abinash Varma, director general, ISMA.

"We have shipped over 2.5 million tonne. We expect to export at least 3.5 million tonne sugar by the end of this season. Prices have now stabilised as Brazilian sugar will soon hit the market," Varma said.

Wet weather over Brazil's cane belt has delayed supply from the world's largest sweetener producer. According to the estimates of Brazilian milling industry association Unica, the output has been 29% down in the April-June quarter helping prices to firm at global market.

"Brazil could produce only 6.69 million tonne in the first quarter as compared with 9.4 million tonne produced over the same period last year. There won't be any drop in prices even if Brazilian sugar floors the global market. The deficit can't be recovered easily leading prices to stabilise," he said.

Indian sugar prices are firm on concerns over production due to a poor rainfall and a lower quota for the September quarter. Indian sugar futures jumped 2% on Monday to hit a contract high on National Commodity and Derivatives Exchange at Rs 3,269.

The quota released for the September quarter was lower than market expectation. The government has allowed millers to sell 4.5 million tonne from July to September - a deviation in the usual practice of releasing extra sugar in the festival season.

"Demand has gone up and so have the prices a bit. But prices are going to stablise now," he said.

After a record output of 26 million tonne this year, the next marketing season (October 2012-Septemeber 2013) is likely to begin with a stock of 7.5 million tonne. ISMA estimates an output of 25 million tonne - down by 1 million tonne from this year due to a bad monsoon.

"We have factored in the crop losses in Maharashtra due to an erratic monsoon. We have trimmed down cane production estimated from 90 million tonne to 76 million tonne in Maharashtra. We expect a surplus production next year too providing enough room for exports," Varma said.

Source : economictimes.indiatimes.com