MUMBAI (Reuters) - Indian mills are struggling to export surplus sugar even after a subsidy announced by New Delhi, the chairman of commodities consultant LMC International said on Thursday, citing low global sugar prices.
Weaker exports from the world’s biggest producer of the sweetener could support global prices, which fell to their lowest level in a year earlier this month.
New York raw sugar prices need to be above 13 cents per lb to make exports attractive, LMC’s James Fry said on the sidelines of a conference.
“Right now, the price does not make it attractive for millers to export ... Even with the subsidy, prices need to rise above 13 cents per lb.”
At 1154 GMT, raw sugar futures were trading up 0.42% at 11.75 cents per lb.
In August, India approved incentives of 10,448 rupees ($147.39) per tonne to encourage cash-strapped mills to export 6 million tonnes of sugar in the 2019/20 marketing year starting from Oct. 1.
“As prices goes up and India starts to become a possible exporter, that is the price where Brazil starts switching more back into sugar. There is a kind of equilibrium,” he said.
Ethanol production is more lucrative for Brazilian mills at the current prices and mills are allocating lesser cane for sugar production, Fry said.
Brazilian cane industry group Unica said sugar production for the 2019/2020 season stood at 20 million tonnes to date, 4.9% lower than the same period a year ago.
Erratic weather is set to trim India’s sugar production in 2019/20 to 26-27 million tonnes from 33 million tonnes a year ago, Fry said, adding: “Production would fall but India is holding huge stocks.”
India is expected to start the new marketing year with carry over stocks of 14.2 million tonnes, the central government says.
($1 = 70.8890 Indian rupees)
Reporting by Rajendra Jadhav; Editing by David Goodman and David Evans