Indian sugar mills, collectively the world’s second-biggest producer, are pinning their hopes on government subsidies to export record volumes for a second year.
The industry is expecting the continuation of government incentives and they could be announced any day, said Abinash Verma, director general of the Indian Sugar Mills Association.
Shipments may climb to about 6 million tons in the year starting Oct. 1, from a record 5.8 million tons in 2019-20, he added. Higher supplies from the South Asian nation, the world’s third-biggest shipper, will potentially put pressure on global prices. Sugar has gained about 24% in the past six months on concerns that output in Thailand may tumble to a decade-low due to dry weather patterns, and as fires threaten to curb next year’s crop in Brazil.
Local mills expect the government to raise the benchmark selling price, help build buffer stockpiles by paying for the carrying cost, increase prices of ethanol and clear subsidy dues, Verma said in an interview. “The cost of production is higher than the selling price of sugar. The government needs to increase the minimum sale price and that will help the mills pay cane price arrears,” he added. Producers are awaiting the subsidy announcement before deciding on the proportion of raw and white sugar varieties while processing a bumper cane harvest, Verma said. India’s sugar production may climb to 30.5 million tons in 2020-21, after diverting some cane juice and B-heavy molasses to make ethanol, from a three-year low of 27.2 million tons a year earlier, ISMA data showed. Subsidies Higher Indian supplies assume significance at a time when production in Thailand, the second-biggest exporter, is set to decline almost 13% to 7.2 million tons in 2020-21. That would be the lowest output since the 2009-10 season, data from the U.S. Department of Agriculture showed. The amount exported will largely depend on the size of the subsidy, and the crop is large enough to allow shipments of as much as 7 million tons, according to Carlos Mera, an analyst with Rabobank in London.
Domestic cane production may climb about 12% from a yesr earlier to 399.8 million tons in 2020-21, helped by an increase in the area under the crop, according to the farm ministry. “India’s exports are not extremely necessary for the global market at this point, however it is necessary for India to put that excess in the market,” Bruno Lima, head of sugar for StoneX Group in Sao Paulo, said by email.