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Sugar exports from India get boost from record plunge in rupee

Worldwide supplies will outpace demand by 3.5 million tonnes in the 2013-2014 season that starts in October, following a 10 million-tonne surplus this year, the International Sugar Organization estimates. Photo: Bloomberg (Bloomberg)Premium
Worldwide supplies will outpace demand by 3.5 million tonnes in the 2013-2014 season that starts in October, following a 10 million-tonne surplus this year, the International Sugar Organization estimates. Photo: Bloomberg
(Bloomberg)

Rising exports from India may add to a global glut and pressure prices in New York heading for a third year of declines

New Delhi: Sugar exports by India, the world’s second-biggest producer, may jump more than threefold next year as Asia’s worst performing currency spurs demand from importers in the Middle East and Asia.

“Shipments may exceed 1 million metric tonnes in the year beginning October 1," said Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd. Exports from the local crop may total 300,000 tonnes this season, according to the National Federation of Cooperative Sugar Factories Ltd.

Rising exports from India may add to a global glut and pressure prices in New York heading for a third year of declines, the longest slump since 1992. Worldwide supplies will outpace demand by 3.5 million tonnes in the 2013-2014 season that starts in October, following a 10 million-tonne surplus this year, the International Sugar Organization estimates. India’s rupee has tumbled 15 percent this year, boosting prospects for exports of everything from rice to wheat and cotton.

“I am positive about big export volumes in the next season," Murkumbi said in a phone interview on Aug. 21. “Exports will be helped by a weak rupee and comfortable surplus. Demand for refined sugar is very strong."

The rupee is the worst performer among 24 major emerging economies after Brazil’s real in the past six months on concern that foreign capital outflows will accelerate as the U.S. Federal Reserve prepares to trim monetary stimulus.

Rupee, Real

“Indian exports will probably be 500,000 to 1.5 million tonnes in the 2013-2014 season because of the weak rupee and a fourth year of domestic surpluses," Manish Gupta, head of sugar trading at Olam India Pvt., said this month. Another 1 million tonnes will be shipped from refineries that import raw sweetener to re-export it as refined sweetener, he said.

The weakening of real and rupee has boosted prospects for exports from Brazil and India, the biggest sugar producers, and may weigh on raw sugar traded in New York and refined sweetener prices in London, according to Alex Oliveira, a trader with Newedge Group in New York.

Both real and rupee are staying low against the dollar, which means Brazil and India will export more, he said in a phone interview on Aug. 21. It’s definitely going to prevent the market from going up.

Brazil’s real has weakened about 19 percent against the dollar since Feb. 22 and touched a 4 1/2-year low of 2.3275 per dollar Aug. 14. Raw sugar for delivery in October fell 0.1 percent to 16.30 cents a pound on ICE Futures U.S. by 5:03 p.m. in Mumbai yesterday, while white sugar for October delivery retreated 0.2 percent to $482.80 a tonne on NYSE Liffe in London.

Ethanol equation

“The most important thing in Brazil is how much cane will be crushed for making sugar and how much will be for ethanol," Oliveira said. “Most likely, more cane will be crushed for sugar compared with ethanol in the second half. We see producers in Brazil trying to take advantage of the weak real by exporting more."

The amount of sugar waiting to be loaded at ports in Brazil rose 7.7 percent in the week ended Aug. 14, according to data from Williams Servicos Maritimos Ltda. The amount waiting to be loaded at the ports of Recife, Maceio, Vitoria, Paranagua and Santos, the country’s biggest, was 1.65 million tonnes, up from about 1.53 million tonnes the week earlier, it said Aug.14.

There is a big shrinkage in the global surplus this year because of strong ethanol production in Brazil, Murkumbi said. When prices went down we saw strong import demand especially from China. Stronger than expected demand and more diversion of cane toward ethanol will be supportive for prices.

“India may have a surplus of 3 million tonnes of sugar in 2013-2014," said Vinay Kumar, managing director of the cooperative federation. An increase in shipments will increase local prices, potentially boosting earnings of mills, which are selling the sweetener at below cost of production, he said.

Production next season may exceed the output in 2012-13 after good monsoon rainfall boosted yield prospects, agriculture minister Sharad Pawar said Aug. 19. Output will be 25 million tonnes this season and may total 23.7 million tonnes in the year from Oct. 1, according to the Indian Sugar Mills Association. Bloomberg

Isis Almeida in London contributed to this story.

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