Indian mills hold off on signing new sugar export deals as local prices jump

Bajaj Hindusthan Sugar

20/09/2021 12:08

* Local prices rise 13% in two months to 4-year high
    * Mills not keen to export at discount to local prices
    * Global prices need to rise to make exports viable

    By Rajendra Jadhav
    MUMBAI, Sept 20 (Reuters) - Indian mills are holding off on
signing new sugar export contracts for the upcoming season as a
rally in domestic prices to a 4-year high widened the gap
between local and global rates, industry officials told Reuters.
    "Mills are not signing export contracts, as they are getting
far higher prices in the local market," said Prakash Naiknavare,
managing director of the National Federation of Cooperative
Sugar Factories Ltd.
    Lower shipments from India could support global prices
 SBc1 ,  LSUc1  as supplies from top producer Brazil are
expected to decline, and traders were banking on India to
compensate for the shortfall.
    After shipping out a record 7.5 million tonnes of sugar in
the current season, Indian mills have so far signed contracts to
export 1.2 million tonnes in the 2021/2022 marketing year that
starts from Oct. 1. 
    The bulk of those deals were signed in August, but a surge
in domestic prices has since cut new contracts almost to zero,
dealers said.  urn:newsml:reuters.com:*:nL1N2QB0UH    
   "Until last month mills were interested in exports as local
and global prices were on a par. After local prices jumped,
their interest dwindled," said a Mumbai-based dealer with a
global trading firm, who declined to be named due to company
policy.
    Local prices  SUG-MMZR-NCX  have risen 13% in two months to
36,900 rupees ($500.39) per tonne, the highest since November
2017, after exports surged in the current year and the economy
recovered from the COVID-19 crisis.
    Exporters were offering mills up to 31,5000 rupees and
32,000 rupees for raw and white sugar respectively.
    Mills are not interested in exporting sugar at a discount to
local prices as the government has discontinued an export
subsidy in place for the last three years, said another
Mumbai-based dealer with a global trading firm.  urn:newsml:reuters.com:*:nL1N2PO1IU
    "Mills are waiting for global prices to recover and the
Uttar Pradesh government to announce its cane price," the dealer
said.
    India's biggest sugar producing state is due to announce its
advised price for sugar cane - the mandatory price mills must
pay to growers - in the next few weeks. With elections looming,
it is likely to be elevated, the dealer said. 
    Global raw sugar prices need to rise above 21 cents per lb
to make exports viable from India, or the government needs to
once again make it mandatory for mills to export a certain
amount of their production, said a New-Delhi based trader.
    Naiknavare said that despite the current slowdown, India
could export more than 5 million tonnes in the new season. 
    "In coming months global prices would rise on lower exports
from India, while local prices will correct with new season
supplies. It will make exports viable," he said.

 (Reporting by Rajendra Jadhav; Editing by Jan Harvey)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-68414378 ; Reuters
Messaging: rajendra.jadhav.thomsonreuters.com@reuters.net))