Indian mills slash sugar exports as local prices rally

Triveni Engineering and Industries

18/06/2018 11:24

* India's 2017/18 sugar exports seen at only 500,000 T
    * Govt earlier set overseas sales at 2 mln T
    * Lower overseas prices make exports less lucrative
    * But surplus sugar awaits India with output seen rising 

    By Rajendra Jadhav
    MUMBAI, June 18 (Reuters) - India is likely to export around
500,000 tonnes or just a quarter of the volume mandated by the
government for overseas sales in 2017/18 amid higher prices at
home, industry officials told Reuters.
    Lower shipments from the world's second-biggest sugar
producer could support global prices  LSUc1   SBc1 , but would
increase India's opening stocks for the next marketing season
when output is expected to surge to a record.  urn:newsml:reuters.com:*:nL3N1T1301
    "Mills are not interested in exports as they are getting
higher prices in the local market," said Abinash Verma, director
general of the Indian Sugar Mills Association (ISMA), a
producers' body.
    Sugar is being sold at around 31,000 rupees ($456.00) per
tonne in India, while exporters are getting less than 21,000
rupees per tonne, dealers said.
    Local sugar prices have jumped 20 percent in a month amid
government measures to help loss-making mills and millions of
cane growers who make up a key voting bloc. 
    Earlier this month, the government fixed a floor price for
sugar at 29,000 rupees a tonne and decided to build a stockpile
of 3 million tonnes to soak up excess supply from the domestic
market. It also granted soft loans worth 44.4 billion rupees to
help millers expand ethanol output capacity.  urn:newsml:reuters.com:*:nL3N1T83O6
    "These moves suddenly changed sentiments. Despite the
government order, mills are now not interested in exporting
their allocated quota," said Ashok Jain, president of the Bombay
Sugar Merchants Association.
    
    SURPLUS SUGAR AHEAD?
    In March, India asked mills to export 2 million tonnes of
sugar and fixed a mandatory export quota for each
mill. urn:newsml:reuters.com:*:nL3N1RB27L
    With only a few mills signing new contracts, the country
could export only 500,000 tonnes of sugar in the current
marketing year ending on Sept. 30, two dealers said.
    That includes 175,000 tonnes that Indian traders have
contracted to sell to Myanmar, Sri Lanka and African countries,
said a New Delhi-based dealer with a global trading firm.
    While the government measures are boosting local sugar
prices, they could plunge again unless the national inventory
drops, said a sugar miller based in Pune in the western
Maharashtra state.
    India is likely to produce 32 million tonnes of sugar in the
current year, compared to domestic consumption of around 25
million tonnes. Output is expected to rise further as farmers
are spurred by the better returns.  urn:newsml:reuters.com:*:nL3N1T1301
    That could bring the South Asian country's stocks to around
10 million tonnes on Oct. 1, making exports much more necessary
in the next season, said Verma of ISMA.
    "The major problem the industry is facing is surplus sugar.
That could be addressed only by disposing stocks through
exports," he said.
    
($1 = 67.9825 Indian rupees)

 (Reporting by Rajendra Jadhav
Editing by Manolo Serapio Jr.)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-6180-7153 ;
Reuters Messaging:
rajendra.jadhav.thomsonreuters.com@reuters.net))