Brazil, low production burn raw sugar exports

Font Size

Print

Feedback

Email

Discuss

New Delhi: Indian sugar millers short-lived tryst with raw sugar exports is likely to come to an end in 2008-09 just within one-year of its start.

The country that has traditionally been an exporter of refined sugar started exporting raw sugar since last year because of huge inventories with millers following two consecutive years of bumper production.

However, with sugar production expected to fall by over 19% in the crop marketing season that started in October, industry players said that millers will find it extremely difficult to sell refined sugar leave alone raws.

Moreover, realisations on raw sugar exports and loss of freight advantage vis-à-vis its bigger rival Brazil would further restrict any raw sugar export.

In 2007-08, India exported around 4.9 million tonne of sugar because of bumper harvest of which more than 80% or around 3.9 million tonne was mostly raws.

“This year the number is expected to dramatically come down and might even become negligible as realisations from raw exports have dipped, while freight advantage is also no longer there,” said Sanjay Tapariya, managing director, Simbaoli Sugar Industry.

Till last year, raws used to fetch around $300 per metric tonne in the international markets, while this has already slid to around $230 per tonne. Moreover, with domestic production expected to be less than last year, there is every possibility that local prices would be firmer than international rates.

As per industry and government estimates, India's total sugar production in 2008-09 is expected to be around 20-22 million tonne, much lower than last year's actual production of over 26 million tonne because of fall in area under sugarcane.

“The freight advantage for raw exporters is not there anymore as prices have dipped to around $40-$50 per tonne from a high of $100 per tonne because of global recession, therefore, buyers now prefer the cheaper Brazilian variety of raws,” another industry official said.

He said big refineries in Middle East were mostly consuming Indian raw sugar, but after Brazil started sending its raws there, demand from India has stopped.

But the situation is not that bad in case of whites or refined sugar as still it commends a premium over raws.

“Moreover, Brazil is not a big player in refined as it exports are almost fully raws,” another industry player said. Meanwhile, the estimated fall in sugar production is also likely to curtail capacity utilisation of Indian sugar millers mainly those in northern India 2008-09.

Bitter pie