Tag Archives: open general licence

Sugar prices fall as India allows OGL exports

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.

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India procrastinates at the expense of exporters

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.

Will India make up its mind?

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.

India discuses sugar but defers decision on OGL

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.

India may hold the key to world supply

With Brazil unlikely to ease sugar market supply concerns in the short term and its rising demand for ethanol India’s sugar exports under Open general Licence (OGL) may hold the key to market supply and consequently an easing in sugar prices which currently stand at near 30 year highs.

With up to 25% of Australia’s sugar crop lost to cyclone Yasi and tight global supply, India may be pivotal to the market establishing whether the decision recently announced by India approving 500,000 tonnes of sugar exports under its sugar OGL is to be ratified.  The decision has been referred by a government keen to ensure that sufficient supply exists for domestic consumption before permitting such exports to proceed.  A review of the decision and its possible ratification are yet to take place.

Brazilian sugar cane to be diverted to ethanol production

Ethanol demand in Brazil may see sugar cane diverted to ethanol production rather than sugar thereby dashing hopes of the possibility of higher sugar production to ease supply.  It is expected that some growers may increase the size of their crops to take advantage of higher sugar prices which in turn may see prices fall later in the year as supply concerns ease.

Despite a larger sugar cane crop expected in 2011/12 sugar production is unlikely to be significantly increased or changed due to the diversion of cane to ethanol production. Rising domestic ethanol demand in Brazil is likely to continue into next year.

Brazil’s sugar production figures, rising domestic Brazilian ethanol demand, India’s OGL sugar exports now looking unlikely, EU out of quota imports and the impacts of cyclone Yasi on Australian production may provide sugar prices with support as concerns grow concerning supply tightness.

Upward trend driven by physical buyers

Australia is now thought to have lost 10% of its 2011/12 sugar production as a result of cyclone Yasi. This amounts to 380,000 tonnes and takes Australia slightly below its 2010/11 production.

News from Australia and India concerning a revised outlook for production and doubts concerning its OGL sugar exports have given sugar prices support. There may be a bullish trend in the short term. The drop away from recent peaks has allowed physical buyers to step in.

White sugar futures rose by 1% to close just shy of $800.