Minister K.V. Thomas confirmed that sugar prices have remained stable since April 2013 after deregulation of the sector. Deregulation has given mills the freedom to sell in the open market and no obligation to supply the sweetener at subsidized rates to government ration shops.
Sugar production during 2012-13 sugar season is estimated to be about 24.8 million tonnes as against domestic consumption requirement of about 23 million tonnes. The import duty on import of sugar has been kept at moderate level of 15 per cent, he added. Sugar is currently available in the market at Rs 35-40 per kg in the capital.
India is the world’s second largest producer and biggest consumer of sugar. India’s rupee has tumbled 14% this year. Exports may increase threefold next year as the depressed domestic currency increases demand for sugar exports from the Middle East and Asia. Exports could reach 1 million metric tonnes according to Renuka Sugars with the National Federation of Cooperative Sugar Factories suggesting that exports this season may exceed 300,000 metric tonnes.
Indian exports may simply add to global sugar stocks further depressing global prices. Sugar prices have fallen for three years making the decline the longest since 1992. Global supply in the 2013/14 season commencing October will exceed demand by 4.5 million tonnes.
A consensus of analysts see sugar prices falling during 2012 with the world sugar surplus seen at just under 8 million tonnes in 2011/12 and falling to just over 3 million tonnes in 2012/13. This is somewhat dependent on whether output will fully recover in the world largest producer Brazil, the amount of cane diverted to produce ethanol and exports from India. Nevertheless, the surplus for 2011/12 creates a likely bearish market during 2012.
A fall in sugar prices may result in Brazilian millers diverting sugar to ethanol production. Large harvests in Europe, India and Thailand have resulted in a higher world surplus.
It is believed that Brazil’s production will not recover significantly as the lower production figures are not due to weather or the amount of cane diverted to ethanol production but mainly due to older rations and lower yields. Therefore, investment is required for an increase in yields and higher Brazilian production.
Raw sugar prices are forecast at around 22 cents during the second quarter during the Brazilian centre south harvest and at around 24 cents at the end of 2012. White sugar is forecast at around $600 during the second quarter and around the same at the end of 2012. Weather patterns could alter this forecast price projection.
The weather phenomena La Nina and El Nino are factors potentially impacting sugar supply. La Nina tends to result in drier weather in the centre south of Brazil thereby delaying crops, harvesting and crushing. El Nino which follows La Nina after the second quarter gives wetter conditions potentially impacting sucrose content. La Nina also results in heavy rains, flooding in the Asia-Pacific region and occasional drought in Africa and South America.
White sugar is currently trading around $626.50 and raw sugar at 24.62 cents.
A major factor determining sugar prices during 2012 will be the price of ethanol and as a consequence the decisions by Brazilian mills to divert cane to ethanol production. The ethanol parity is currently around the 20 cents a pound for raw sugar. Below this raw sugar price mills would be expected to convert cane to ethanol and not to sugar.
Contrary to some expectations India has allowed 500,000 tonnes of sugar exports under its Open General licence (OGL). Despite forthcoming local elections and some concerns over agflation India has permitted the full 500,000 tonnes for export. Previously 200,000 tonnes had been expected following comments in recent days.
It is expected that over 1 million tonnes of sugar for export will be approved under OGL during the year once India has confirmation of the size of its crop. India is the world's second largest grower.
India is still to announce whether the decision to permit 500,000 tonnes of sugar for export is to be ratified. Sugar prices have fallen sharply recently and India’s indecision may cost exporters if after delays the panel of ministers approves sugar exports under its Open General Licence (OGL).
India is the world’s second largest producer of sugar after Brazil. The delay in confirming OGL exports had been to ensure sufficient domestic supplies and to avoid the impacts of agflation.
India is expected to produce between 24.5 million tonnes and 25.5 million tonnes of sugar. Indian consumption is in the region of 22 million tonnes. Indian whites were available at $720 per tonne down by approximately $50.
India has raised the price at which sugar mills buy cane from farmers from 139 Rupees per 100 kg of cane to 145 Rupees per 100 kg. The price increase is effective as of 1 October 2011 at the start of the coming season.
$1 is equal to approximately 45 Rupees.
No decision was reached during the previous meeting on whether to permit up to 500,000 tonnes of sugar exports under Open General Licence (OGL) due to the absence of a number of government ministers. Discussions were widened to include a number of Indian government ministers due to the political sensitivity of the ‘agflation’ issue and the risk of food price rises. A decision on the matter may be made in the next two weeks.
India’s indecision has ensured that sugar prices remain high in the face of tight supply. India is the second largest producer of sugar and its largest consumer.
The indian government discussed sugar prices and domestic sugar stocks today. The panel chaired by Finance Minister Pranab Mukherjee discused the topic which was scheduled on the agenda for today’s meeting but did not reach a decision due to the absence of Sharad Pawar the Minister for Agriculture, Anand Sharma the Commerce Minister and K.V. Thomas the Food Minister.
Indian exports have not been banned but sugar shipments have had restrictions placed discouraging exports to protect domestic sugar supply in the wake of rising agflation. Sugar currently sells at Rs 32-35 per kg retail. Prices have been relatively stable for past few months due to higher production.
Sugar production is expected to be 24.5 million tonnes during the 2010/11 season which started in October and runs through to July. Production is up from 19 million tonnes last year. Domestic consumption is approximately 22 million tonnes.
The Sugar Mills Association has suggested that one million tonnes of sugar should be permitted for export under OGL due to this being surplus to India’s domestic consumption.
A further meeting of the panel is expected in the next few weeks. The sugar market awaits the decision in an indication that supply will ease.