New Delhi: India, the world’s second-biggest sugar producer, will refrain from making the raw variety this year as the scrapping of an export subsidy and low global prices mean overseas sales are unprofitable.
“International prices are not viable for exports from India," Abinash Verma, director general of the Indian Sugar Mills Association, said by phone today. “Therefore raw sugar may not get produced in the absence of any government support."
The absence of India in the raw sugar market may allow Brazil, Thailand and Australia to boost shipments to refiners from the Middle East to Bangladesh. Futures in New York fell 54% since reaching a three-decade high in 2011 as farmers planted more cane, extending a global glut into a fifth year.
“Given the excess supply and stocks on the global market, other suppliers could easily be found depending on where the buyers are located," Tom McNeill, a director at Green Pool Commodity Specialists Pty, said in an e-mail. “Other suppliers would probably view it as regaining market share in a market that is now a level playing field."
India shipped 1.2 million tons of raw sugar in the year ended September including 700,000 tons with financial incentives from the government, according to the mills association. The South Asian nation sold a total of 2.2 million tons last year, the group estimates.
Hard to survive
“It’s very difficult to survive without incentives," said Sanjeev Babar, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd., which accounted for about 25% of the country’s output in 2013-2014. “We will not make raw sugar as there is no incentives."
India announced a subsidy for raw production and exports in February to help mills clear dues to farmers, a move opposed by Brazil and Thailand. The incentive of Rs3,371 ($55) a ton, wasn’t extended beyond September, the food ministry says.
Futures slumped to 14.93 cents a pound on 8 September, the lowest since January, and closed 1.4% lower at 16.44 cents on ICE Futures US on Tuesday.
The International Sugar Organization forecasts the world will have a surplus of 1.3 million tons in the 12 months started 1 October, the fifth straight glut, while the impact of a production shock would probably be reduced by large stockpiles.
Sugar production in India may total 25 million tons to 25.5 million tons in the year started 1 October, the association said 17 September. Domestic stockpiles was seen at 7.2 million tons to 7.5 million tons at the start of October, it said. Bloomberg