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Indian sugar exports may rise to 3 mn tonnes

Indian sugar exports may rise to 3 mn tonnes
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First Published: Fri, Apr 13 2007. 08 17 PM IST
Updated: Fri, Apr 13 2007. 08 17 PM IST
By Pratik Parija/Bloomberg
New Delhi: Sugar mills in India, the world’s second-biggest producer of the sweetener, may export as much as 3 million tonnes to prevent this year’s record harvest from creating a glut, according to a survey of growers and analysts.
Exports will be helped by sops proposed by the government to make shipments competitive, according to nine company officials and analysts surveyed by Bloomberg News. The survey result compares with a forecast of 2 million tonnes by Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd, India’s third-biggest producer, made two weeks ago.
Raw sugar, traded in New York, has fallen 42% in the past year as global production heads for a surplus for the first time in four years. Prices in India have slumped by more than a fifth in the period on forecasts of a bumper harvest, increasing the pressure on mills to boost exports.
“There’s no way we can survive without exports,” said P. Ramababu, president, Indian Sugar Mills Association by phone 11 April. “It’s better to push out whatever possible to bring tightness in the market.” Ramababu was one of the speakers at an industry conference on 13 April in Mumbai.
India’s output will reach a record 26.1 million tonnes in the year ending 30 September, according to C. Czarnikow Sugar Ltd. That may more than double domestic inventory to 10 million metric tonnes by 1 October, enough to supply the domestic market for six months, according to the survey.
‘Not rosy’
Global output may increase 5.8% this year, resulting in a projected 8.5 million-tonne surplus, said Peter Baron, chief executive officer of the International Sugar Organization, in an interview in Mumbai on 13 April. The surplus is 18% larger than forecast in February, Baron told the industry conference.
“When we next revise our estimate, the surplus may go up as we see a lot of production coming into the market globally,” he said. “The fundamentals aren’t rosy.”
The government said March 29 it will stockpile 2 million tonnes to support prices and pay mills up to Rs1,450 ($34) a tonne to meet transportation costs to ports. The incentives will apply after the end of assembly elections in Uttar Pradesh, the country’s biggest sugar cane-grower.
The export incentives are compatible with World Trade Organization rules, S.L. Jain, director general of Indian Sugar Mills Association said.
Indian sugar is available for export at $305 a tonne, free-on-board basis, compared with $312 for Thai sugar. Mills have shipped 400,000 tonnes since the government ended a six-month ban in January and sales may pick up after the export subsidy begins next month, ISMA’s director-general S.L. Jain said.
Inventory costs
“At today’s prices, exports are at no-profit, no-loss but it saves us carrying costs,” said Arhant Jain, vice president, finance, Dhampur Sugar Mills Ltd.
Cutting costs is crucial as global prices are expected to extend declines as the surplus widens. A slide in prices has cut profits at India’s top three sugar mills — Bajaj Hindusthan Ltd, Balrampur Chini Mills Ltd and Shree Renuka Sugars Ltd — and their shares are among the 10 worst-performers on the BSE-500 index in the past year.
“It’s crucial for us to export,” the Sugar Association’s Ramababu said. “How much and for how long one can store sugar? It will become yellow after some time.”
Refined, or white, sugar futures rose $1.50, or 0.5%, to $321.50 a tonne in London on 12 April, taking the past year’s loss to 30%. Raw sugar for July delivery fell 1 cent to 9.88 cents a pound in New York.
—With reporting by Thomas Kutty Abraham in Mumbai
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First Published: Fri, Apr 13 2007. 08 17 PM IST
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