Mumbai: Sugar traders are signing deals at $775 per tonne free on board (FOB) to take advantage of record-high international prices to sell 500,000 tonnes of exports approved three weeks ago, three dealers and one analyst told Reuters.
Good demand from neighbours and Gulf countries will mean exporters can easily ship out the quota, allowed under the Open General Licence scheme, by mid-August, they added, and there are calls now for further exports.
“The FOB price is rising, tracking the surge in the international market. Yesterday exporters were quoting $750 per tonne. Today they are quoting $775,” said Kamal Jain, managing director of Kamal Jain Trading Services, a sugar brokerage based in western Maharashtra state.
Singapore dealers have offered Indian white sugar at $800 a tonne free on board from $790 in late June, with no deals done.
London white sugar futures spiked to a record $8.75 per tonne on Wednesday and raw sugar rallied as fears of a shrinking cane crop from the world’s No. 1 producer Brazil, which usually exports around 28 million tonnes a year, spurred investor buying.
A Reuters technical analyst expects New York sugar to extend gains to 31.40 cents/lb.
“Sugar millers are selling aggressively for immediate shipment. They are getting higher-than-expected prices,” said a Mumbai-based sugar dealer with a leading international commodities brokerage.
“They wanted to ship this quantity before prices correct,” the dealer said.
An earlier round of 500,000 tonnes of OGL exports, also for the current 2010/11 year, secured average prices of $700 per tonne when sales were made in April-May.
The Indian Sugar Mills Association last week called on the government to allow additional exports of 1 million tonnes.
“There is definitely some room for additional exports,” said Ashwini Bansod, a senior analyst at MF Global Commodities India.
“The country’s domestic consumption is not rising as per expectations. In 2011/12 also production would be higher than consumption.”
India, the world’s top sugar consumer and the biggest producer after Brazil, should churn out 24.2 million tonnes in the current 2010/11 season and output may jump to 26.5 million tonnes in 2011/12, according to industry estimates. The country consumes an estimated 22 million tonnes a year.
The South Asian country had to import sugar in 2009 after the worst drought in nearly four decades hit output and this year’s OGL sales are the first since then.
Farmers have asked the government to allow exports of sugar, wheat and rice as stocks pile up from bumper harvests.
The government finally said on Tuesday it would allow one million tonnes of common rice exports and an unspecified amount of wheat but may have missed the boat as Russia is already selling wheat.
Industry officials say a cautious government may not allow additional sugar exports until November.
“This is first time India is selling sugar when prices are going up in the world market. Usually we sell when there (is a) glut and prices go down,” Jain said.
In the past decade India has imported sugar when prices were rising in the international market and exported when there was surplus in the world market.