India to be top sugar producer, but may have to sell cheap

India to be top sugar producer, but may have to sell cheap

London: India is expected to overtake Brazil as the world’s top sugar producer in 2007-08, but a lack of storage may force it to sell the product at lower prices later this year, the International Sugar Organization (ISO) said on Monday.

The London-based ISO, in a monthly report, pegged Indian sugar output in 2007-08 (October or September) at an all-time high of 33.15 million tonnes (mt)—up 8% year-on-year. ISO noted that India’s sugar industry has reached a consensus not to sell raw sugar for less than 10 cents (Rs4.06) a pound (0.45kg).

“It remains to be seen, however, whether this target can be achieved in the second half of 2007, when storage capacities seem to be turning into a serious issue," ISO said in the report.

“During the peak production months from November to April...large-scale exports, regardless of the level of world market prices, may become the only viable option."

In August, the ISO projected Brazilian sugar production in 2007-08 (October or September) at 32.38mt—up less than 3% year-on-year.

Indian sugar futures rose on Tuesday, with the October contract helped by talk new crop cane crushing would be delayed by two weeks because of rains.

Last week, millers in Maharashtra had decided to advance crushing by a month to 1 October.

India, the world’s top consumer of sugar, has exported 1.5mt of white sugar since January 2007, when a ban on overseas sales ended, the ISO report said, quoting industry reports.

“This indicates that logistical infrastructure bottlenecks are not as tight as previously expected in some quarters and the industry may ship significantly more than 3mt of sugar a year," the report said.

To get rid of the surplus sugar, India has cast an eye on the raw sugar market and, according to the media, the industry has managed to sell around 550,000 tonnes of the unrefined product to refineries in West Asia, the ISO said.