MUMBAI: India is likely to export more than 2 million tonnes of sugar in 2014/15 as the top consumer is set to produce a surplus of the sweetener for the fifth straight year despite chances of reduced rainfall, a commodities executive said on Monday.
The continued exports from the world’s second biggest producer would put pressure on global prices that are already depressed due to a global surplus.
Sugar prices have fallen about 13 percent after hitting a one-year high above 20 cents a pound in October, dragged lower by an estimated 4.4-million-tonne overhang in 2013/14, according to the International Sugar Organization.
“Next year India can export more than 2 million tonnes … mostly raw sugar,” said Rahil Shaikh, managing director of commodities trader ED&F Man Commodities India, in an interview.
“India can export even more if prices rise in the world market and the government continues the current subsidy policy.”
The exports would be about the same as the 2.2 million tonnes of sugar India has exported since the start of the 2013/14 marketing year on Oct. 1, 2013, Rahil said.
Exports of raw sugar have now nearly halted as the bulk of the year’s production has been shipped. India is also struggling to find buyers for its low quality white sugar as Thailand is supplying better quality white at lower prices, Rahil said.
India traditionally produces white sugar, but this year it ramped up production of raws for exports as a massive surplus pushed local prices below the cost of production.
New Delhi has also been giving sugar producers an incentive of 2,277 Indian rupees ($38.53) per tonne for exports.
“In coming months India can export a few thousand tonnes of white sugar if prices rise in the world market due to Ramadan or any other factor like El Nino,” Rahil said.
“But large scale exports of white sugar are unlikely.”
Last year India signed white sugar export deals as demand from Asian buyers rose ahead of the Muslim fasting month of Ramadan.
FEARS OF DROUGHT
El Nino, an abnormal warming of waters in the equatorial Pacific, is linked with poor rains or drought in South and Southeast Asia, as well as in Australia.
The weather pattern will likely bring below-average monsoon rainfall to India in 2014, the Indian weather department has forecast.
India’s monsoon rains failed in 2009 due to an El Nino pattern, forcing the country to import sugar and pushing global raw sugar futures to a 30-year peak.
“This year reservoirs are holding ample water due to last year’s good monsoon season,” Rahil said.
“So even if there is El Nino, the impact on cane production won’t be as dramatic as 2009/10.”
Water levels in India’s main reservoirs were at 33 percent of capacity on May 1, up 42 percent compared to the ten-year average for this time of year, according to government data.
Cane arrears – or the amount of money that sugar mills owe to farmers – have risen to over 120 billion rupees ($2 billion), but still the area under cane will remain steady as it is giving better returns than other crops, Rahil said, who has been trading Indian sugar for nearly two decades.
“Farmers are very much interested in cane due to higher prices,” he said.
The South Asian nation for the first time in at least two decades is likely to produce surplus sugar for the fifth straight year in 2014/15, Rahil said, forecasting production of 23.7 million to 24.5 million tonnes, compared to 24.1 million tonnes estimated for the current year.
India’s annual consumption is pegged at 23.5 million tonnes.