3 OCT, 2012, REUTERS
MUMBAI: India is set to produce a third sugar surplus in a row in 2012/13, but the abundance is unlikely to find overseas buyers as millers will want a hefty premium over world prices to meet higher production costs.
The second-biggest sugar producer and top consumer, India swings from net exports to net imports every two to three years depending on weather and harvest quality, adding volatility to world prices.
It last had to import sugar because of shortages in 2009/10, sending global prices to 30-year highs.
India exported about 3.3 million tonnes in the year ending Sept. 30, up from 2.6 million the previous year, helping to pull down world prices from multi-year highs.
"No-one is signing new export deals. Local prices are very high. There is no export parity at the current price," Sucden India Managing Director Yatin Wadhwana said.
India exports mainly white sugar to the Middle East and neighbouring countries. The price in the local market is nearly $100 per tonne over London sugar futures.
Local millers cancelled some export contracts signed earlier and they were even importing raw sugar from overseas as local prices rallied by more than a fifth in the past three months, widening a gap with overseas prices.
By 1059 GMT, December white sugar on Liffe eased 0.03 percent to $592.4 per tonne, against a spot price of 35,693 rupees ($683.8) per tonne in India on Wednesday.
The gap is likely to remain, as in the next two months festival demand will keep prices firm, and thereafter mills will seek a higher price for new season produce due to a rise in production costs owing to expensive cane.
"Festival demand and an estimated drop in Maharashtra's production are supporting prices," said Ashok Jain, president of the Bombay Sugar Merchants Association.
Indians will celebrate the Dussehra festival this month and Diwali in November.
"Drought-hit farmers in Maharashtra are demanding higher prices for cane and mills have to raise the price to secure cane supplies," said Vedika Narvekar, a senior analyst with Angel Commodities Broking.
Farmers are demanding mills pay above 3,000 rupees per tonne for their cane, which can potentially lift production costs above 3,300 rupees per 100 kg, said an official with a co-operative sugar mill based in Maharashtra.
India started 2012/13 year with 6 million tonnes of carry forward stocks and is likely to produce 24 million tonnes of sugar in the new year despite an estimated drop in Maharashtra. Local consumption is pegged at 22.5 million tonnes.
"The difference between local and overseas prices is likely to stay there for a longer period," said a Mumbai-based dealer at an international commodity trading firm.
"Overseas prices are under pressure due to expectations of bumper output in Thailand and Brazil. Instead of exporting at lower prices, Indian mills will prefer to sell unsold stocks in 2013/14."
Bumper crops and lower imports by major consumers Russia and China will push global sugar prices down further in the 2012/13 marketing year, consultant Jonathan Kingsman said last month.
MUMBAI: India is set to produce a third sugar surplus in a row in 2012/13, but the abundance is unlikely to find overseas buyers as millers will want a hefty premium over world prices to meet higher production costs.
The second-biggest sugar producer and top consumer, India swings from net exports to net imports every two to three years depending on weather and harvest quality, adding volatility to world prices.
It last had to import sugar because of shortages in 2009/10, sending global prices to 30-year highs.
India exported about 3.3 million tonnes in the year ending Sept. 30, up from 2.6 million the previous year, helping to pull down world prices from multi-year highs.
"No-one is signing new export deals. Local prices are very high. There is no export parity at the current price," Sucden India Managing Director Yatin Wadhwana said.
India exports mainly white sugar to the Middle East and neighbouring countries. The price in the local market is nearly $100 per tonne over London sugar futures.
Local millers cancelled some export contracts signed earlier and they were even importing raw sugar from overseas as local prices rallied by more than a fifth in the past three months, widening a gap with overseas prices.
By 1059 GMT, December white sugar on Liffe eased 0.03 percent to $592.4 per tonne, against a spot price of 35,693 rupees ($683.8) per tonne in India on Wednesday.
The gap is likely to remain, as in the next two months festival demand will keep prices firm, and thereafter mills will seek a higher price for new season produce due to a rise in production costs owing to expensive cane.
"Festival demand and an estimated drop in Maharashtra's production are supporting prices," said Ashok Jain, president of the Bombay Sugar Merchants Association.
Indians will celebrate the Dussehra festival this month and Diwali in November.
"Drought-hit farmers in Maharashtra are demanding higher prices for cane and mills have to raise the price to secure cane supplies," said Vedika Narvekar, a senior analyst with Angel Commodities Broking.
Farmers are demanding mills pay above 3,000 rupees per tonne for their cane, which can potentially lift production costs above 3,300 rupees per 100 kg, said an official with a co-operative sugar mill based in Maharashtra.
India started 2012/13 year with 6 million tonnes of carry forward stocks and is likely to produce 24 million tonnes of sugar in the new year despite an estimated drop in Maharashtra. Local consumption is pegged at 22.5 million tonnes.
"The difference between local and overseas prices is likely to stay there for a longer period," said a Mumbai-based dealer at an international commodity trading firm.
"Overseas prices are under pressure due to expectations of bumper output in Thailand and Brazil. Instead of exporting at lower prices, Indian mills will prefer to sell unsold stocks in 2013/14."
Bumper crops and lower imports by major consumers Russia and China will push global sugar prices down further in the 2012/13 marketing year, consultant Jonathan Kingsman said last month.
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