India, Top Sugar Buyer, to Turn Exporter on Supplies

India, the biggest sugar buyer, may become a net exporter next year as output is likely to exceed demand for the first time in three years, pressuring prices.

“Forget about imports, we will be in a position to export next year,” Farm Minister Sharad Pawar said in an interview yesterday. Production “may exceed” annual demand of about 23 million metric tons, he said.

India has been a net buyer since 2008 after cane growers switched to planting wheat and oilseeds, and last year’s drought ravaged crops, pushing prices in New York to a 29-year high in in February. Increased production from the Asian country may weigh on prices that have plunged 44 percent this year on bets that rising supplies will erase a global deficit.

“India sneezes and the whole world gets a cold,” G.S.C Rao, chief executive officer of Simbhaoli Sugars Ltd., a 75- year-old mill, said by telephone. “It will definitely have an impact on world prices if India doesn’t import.”

Raw sugar for July delivery fell for a second straight day yesterday on ICE Futures U.S., losing 1.1 percent to 14.98 cents a pound. Futures lost 8.7 percent in April for a third straight monthly decline amid bets global output will rebound. The price may drop to as low as 12 cents in the next two weeks, said Hank King, the managing director of Trendphonic Futures Trading LLC.

“We are facing a situation of oversupply,’ he said. “Sugar prices will remain depressed.”

Global sugar production may exceed demand by 6 million tons in 2010-11, the first surplus in three years, Sucres et Denrees SA said April 30. The International Sugar Organization forecasts an 8 million-ton shortfall in the 12 months ending September.

Increased Plantings

Cane plantings in the nation’s main growing states of Uttar Pradesh, Maharashtra and Karnataka have been “very good,” said Pawar at his office in New Delhi.

“If domestic production is improving, why should we encourage imports” he said.

Imports by the biggest producer after Brazil may halt as output this year may top an industry forecast, Vivek Saraogi, managing director at Balrampur Chini Mills Ltd., India’s second- biggest mill, told analysts yesterday. Uttar Pradesh may produce 5.2 million tons and Maharashtra 7.3 million tons, he said.

Mills and traders have imported about 3.5 million tons in the season that started Oct. 1, more than twice the amount from a year ago, Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., India’s top refiner, said in an interview April 29. Purchases in the next six months may not exceed 1 million tons as traders hold off imports amid falling local prices, he said.

Duty-Free Imports

Prices in Mumbai, India’s biggest wholesale market for the commodity, have fallen 29 percent from a record 4,050 rupees per 100 kilograms on Jan. 8 after the government extended duty-free imports of white sugar until Dec. 31.

“The government should impose an import duty immediately to protect the industry and farmers,” Simbhaoli’s Rao said. Output may exceed 25 million tons in the year starting Oct. 1 because of an 18 percent increase in cane planting, he said.

The government will consider reinstating the tax only after assessing cane production, Pawar said.

source: businessweek