October 20, 2015 / 10:44 AM / in 2 years

Rising global sugar prices to help India mills meet export target

NEW DELHI (Reuters) - Indian sugar mills will meet government demands to export 4 million tonnes of the sweetener in the marketing year beginning this month, helped by surging global prices and potential new markets such as China and Indonesia, an industry official said.

A worker stands behind sacks containing processed sugar crystals inside a sugar factory in Satara district, about 285km (177 miles) south of Mumbai May 10, 2011. REUTERS/Vivek Prakash

India, the world’s biggest sugar consumer and its No.2 producer, last month unveiled new rules making it compulsory for mills to step up exports to at least 4 million tonnes in the current crushing season to reduce large stockpiles.

But some market participants had said that would be difficult to achieve as global prices SBH6 were too low to export. But they have climbed over 20 percent since then on worries about a global sugar deficit as appetite for the sweetener grows.

“Global market conditions are now better than what we had anticipated because prices have moved up, so now mills will be able to meet their target of 4 million tonnes this year,” Abinash Verma director general of the Indian Sugar Mills Association (ISMA), said at the Reuters Commodities Summit.

After five years of surplus output, India, which was locked in a damaging cycle of boom and shortage, has now emerged as a “structural surplus sugar producer and exporter”, Verma said on Tuesday.

Mills will mostly export raw sugar this year, with a jump in refining capacity in Asia and Africa set to help India boost demand for cargoes.

Other than exporting to its traditional markets in the Middle East, India will also try selling to countries like China, Indonesia, Malaysia, Myanmar, Sri Lanka and Bangladesh, Verma said.

With the help of a government export incentive, India last year shipped about 1.2 million tonnes of sugar, but that scheme has not been extended into this year

And even with rising global prices, Indian mills are still likely to make losses on exports.

“But we are willing to export, as we believe that a jump in local prices will help us recoup some of the losses on exports. A rise of 1.50 rupees a kg will suffice,” Verma said at the Summit, held at the Reuters office in New Delhi. Ex-mill prices currently stand at 25-27 rupees a kg.

India is likely to produce 25 million tonnes of sugar this year, down 5 percent from the previous season. Indians consume 25.5-26.0 million tonnes of sugar annually.

Follow Reuters Summits on Twitter @Reuters_Summits

Reporting by Mayank Bhardwaj; Editing by Joseph Radford

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