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Sugar mills in India have hit a sweet spot with the government export subsidy to bring down inventory and signs of firming international prices after the recent cut in global production estimates to 187 million tonnes (mt) for theyear 2018-19 against 203 mt logged in the previous year.
The global sugar output this year is almost equal to consumption of 186 mt, though the carry-forward stock of 16 mt will limit any sharp spike in prices. India has an inventory of about 10 mt.
Sugar companies have so far exported about 8.3 lakh tonnes of sugar. Of this, about 4.5 lakh tonnes has been traded by sugar mills from Uttar Pradesh.
Prakash Naiknavare, Managing Director, National Sugar Federation said the world is witnessing a long dry spell caused by El Nino, which started in October and is projected to continue till May.
“We need to boost sugar exports before the world price settles down or crude oil price declines from the current level of $85 a barrel, which may lead to Brazil switching from ethanol production to sugar,” he added at a seminar organised by the All India Sugar Traders Association and Maharashtra Rajya Sahakari Karkhana Sangh to chalk out an export strategy. The current crushing season began this month.
Atul Chaturvedi, Chairman, Shree Renuka Sugars said India would play a key role in determining sugar prices this year as most of the world’s sugar inventory is here.
In March, the government allowed 2 mt of sugar exports under the Minimum Indicative Export Quota to be executed by September. The deadline for export was extended to December due to a poor response.
Dev Gill, an analyst from London-based Marex Spectron, a global commodity trading company, said the world sugar production estimate has swung from surplus to stable due to lower production in Brazil, the European Union, Ukraine and Thailand,, putting India centrestage.
Looking at the rising price of petroleum, Brazil has diverted much of its cane output towards ethanol production, leading to a sharp rise in the international price of sugar, he added.
On the domestic front, Praful Vithalani, President, AISTA, said sugar production may turn out to be lower than the current industry estimate of 31.5 mt, but there will still be a surplus at end of the year.
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