Agri Business

Sugar mills struggling to export surplus as overseas prices fall

Reuters MUMBAI | Updated on January 10, 2019 Published on January 10, 2019

Sugar mills expected to export 2.5 mn to 3.5 mn tonnes

Sugar exports are likely to be far lower than a 5 million-tonne target set by New Delhi as a strengthening rupee and falling global prices make shipments unattractive despite a government push for overseas sales, industry officials said.

Lower shipments from the world's No. 2 sugar producer could support global prices that fell more than 20 per cent in 2018, but fewer exports could also increase Indian stockpiles ahead of the next marketing season and force the government to provide more support to an ailing industry.

India is likely to export 2.5 million to 3.5 million tonnes of sugar in the 2018/19 marketing year that started on Oct. 1, five dealers and three industry officials told Reuters. “Mills are not ready to sign new contracts as the difference in local and overseas prices widened,” said a Mumbai-based dealer with a global trading company that exports the sweetener out of India.

“Going by the current trend, it seems India could manage to export 2.5 million tonnes,” he said. Sugar is being sold at around Rs 29,200 ($414) a tonne in India, while exporters are getting less than Rs 19,000 a tonne, dealers said. Also, the rupee has risen 5.5 per cent from a record low of 74.48 against the U.S. dollar in October, denting mills' margins from overseas sales.

Subsidies

That will make it hard to meet the 2018/19 target set in September despite government incentives such as transport subsidies and direct cane payments to farmers to encourage cash-strapped mills to ship surplus sugar overseas. Exports could pick up in coming months, though, as mills are struggling to make cane payments to farmers, said Rohit Pawar, president of Indian Sugar Mills Association (ISMA).

“I hope we could export more than 3.5 million tonnes, and for that, millers have to come forward more aggressively and the government should provide bridge funding,” Pawar said. Indian mills have contracted to export 1.4 million tonnes of sugar since the start of the marketing season on Oct.1, shipping around 650,000 tonnes so far, four dealers said.

Published on January 10, 2019
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