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The global sugar market continued to be volatile with raw sugar prices topping 20 US cents a pound on Tuesday night on fears that Indian sugar mills might default on their export commitments.
It fluctuated on Wednesday going below the 20 cents mark before finding its way up. The global market’s reaction is in contracts to assurances from exporters that there will not be any default and all commitments will be honoured.
Fears over default gripped the market as some mills sought either cancellation of the deals signed earlier when prices hovered around 17 cents or renegotiation.
Two-week rally
An industry source told businessline on condition of anonymity that the government announced its policy to resume sugar exports on November 5 but some traders in anticipation of the announcement had entered into forward contracts at prices that prevailed then.
“Prices have since increased and mills are wanting to renegotiate before supplying sugar stocks. All contracts post the policy announcement have not had any issue,” the source said.
In early trade on Wednesday, raw sugar for March delivery on the InterContinental Exchange, New York, quoted at 20.28 cents ($450.66) down a tad from 20.29 on Tuesday, extending a two-week rally to touch a seven-month high.
White sugar, on the other hand, was down by $4.80 a tonne to $546.50 during mid-day on Wednesday.
Sugar prices have gained on two other factors. One is the Brazilian sugar industry said production in the Latin American nation’s Centre-South will be down 3.1 per cent this year. A higher allocation of sugar by Brazil for producing ethanol has also boosted prices.
Sugar exports from India came to a halt from June 1 after the Centre capped shipments at 10 million tonnes to ensure the domestic market had ample supplies during the festive season until the new crop was crushed.
Subsequently, it permitted another 1.2 mt of sugar and waited until November 1 to assess production in the new season before allowing the resumption of exports.
With production estimated at a record 36.5 million tonnes (mt), the Government has permitted shipments of 6 mt of sugar by May 2023. This is over 5 mt short of Indian exports last season (October 2021-September 2022), firing up the global market.
Meanwhile, the Food Ministry, which allocates the sugar export quota for mills, issued an order allowing additional export quota, which will be exchanged with trading houses. As a result, the domestic sale quota for these mills has been adjusted.
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