New Delhi: India’s sugar mills will soon seek government permission to export an additional half a million tonnes of the sweetner as output is expected to rise in the next season from October, the chief of a leading industry body said on Wednesday.
“Now, it makes sense to export another 500,000 tonnes this season,” Abinash Verma, director general of the Indian Sugar Mills Association (ISMA), a producers’ body, told Reuters in an interview.
India, the world’s top consumer of sugar and second-biggest producer after Brazil, has allowed 500,000 tonnes of unrestricted exports, known as Open General Licence (OGL) sales, so far in the current season.
Verma said carryover stocks from the 2010/11 season were expected at five million tonnes.
“When domestic sugar prices have fallen below the cost of production, carryover stocks should not be beyond 4.0-4.5 million tonnes. Otherwise, prices will fall further hurting mills’ ability to pay cane farmers,” Verma said.
He reiterated expectations that India’s sugar output would rise 7.4%-9.5% in the new season from October.
“Based on initial estimates of sugar mills, next year’s production is expected at 26.0-26.5 million tonnes, way above our consumption,” Verma said.
ISMA has in the past changed its forecast as the season progresses.
Sugar mills in India are likely to churn out 24.2 million tonnes in the current 2010/11 season, according to ISMA, while government estimates are slightly higher.
Encouraged by strong prices, farmers are likely to plant more cane in 2011/12, leading to a surplus in the next season.
India annually consumes around 22 million tonnes of sugar.
After months of dithering, the government allowed mills to export 500,000 tonnes in April under the OGL scheme and these sales are still underway.
Industry members said they missed a chance to cash in on higher global prices.
“By the time we could start exports, Thailand was in the international market with its two million tonnes of surplus. The country could not make the best out of it,” Verma said.
Thailand, the world’s second-largest exporter after Brazil, is forecast to have record output from the current 2010/11 crop of 9.62 million tonnes and would have seven million tonnes of the sweetener left for export in 2011, the highest ever.
Agricultural minister Sharad Pawar, who also favours easing export curbs on rice, wheat and cotton, has said India must learn a lesson from the delay in allowing sugar exports.
India had first permitted exports in December. Higher food prices made the government change its mind and overseas shipments were allowed only in April.
Benchmark New York prices have surged more than 15.5% in the past one month, underpinned by a slow start to the harvest in Brazil and lengthy delays at its Santos port.
On Tuesday, ICE July raw sugar futures climbed 0.76 cent, or 3.2%, to end at 24.35 cents per lb, the highest finish in six weeks.
New York sugar is heading towards 25.45 cents per lb as it has cleared a resistance at 24.20 cents, Reuters market analyst Wang Tao said.
Between 1 Oct. and 31 May, Indian mills produced 23.7 million tonnes of sugar, up from 18.5 million tonnes in the year ago period, Verma said.
“Sixty-five mills were still crushing cane against 19 in the previous year, giving us the confidence to achieve the 2010/11 output forecast of 24.2 million tonnes,” he said.