Indian sugar mills association

India cautious as its mills se

Date:	06 Nov 2011

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Nov 5: Sugar market heavyweight India is likely to delay half of this year`s expected one million tonnes of unrestricted exports until early 2012 due to output delays, a decision that would protect Indian consumers and limit the country`s impact on world prices.

India, the world`s top sugar consumer and biggest producer after Brazil, can cause big gyrations in international sugar futures prices because of its clout as either an exporter or an importer, depending on the progress of its crop.

After a favourable monsoon season, European sugar traders have said they expected Indian authorities to approve 500,000 tonnes of unrestricted or so-called “Open General Licence” exports in November, and possibly another 500,000 tonnes in December depending on progress of the crush.

However, some Indian industry officials said crushing was a little late in the top two producing states of Maharashtra and Uttar Pradesh, possibly delaying exports of the second tranche into next year.

“This year we have higher carry forward stocks and we know for sure that the sugar cane area has risen,” said a senior official at the Maharashtra State Cooperative Sugar Factories Federation, who asked not to be identified.

“That will allow the government to clear a first tranche this month, but I don`t think it will allow a second tranche before February.”

Indian authorities, concerned over double-digit food price inflation, are wary of permitting large exports.

By contrast, many sugar producers are keen to export quickly, to benefit before high global prices slip any further, and say supply is ample.

“We have substantial stocks and we should not miss the bus,” said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, which groups 250 sugar mills.

He acknowledged reports of delays in crushing in areas around Kolhapur in Maharashtra.

“But the issue is likely to be resolved soon,” said Kumar, who argued that India could very safely export 3 million tonnes of sugar in the new season that began in October, compared with 1.5 million tonnes of unrestricted sugar exports in 2010-11.

“Mills have already started crushing in western Uttar Pradesh and we expect most mills to start functioning across the country between November 10 and November 15.”

FOOD SECURITY

The industry officials said the government would need a clear view on output before allowing exports. India`s food inflation accelerated to a nine-month high in late October, driven mainly by protein items.

“The authorities don`t like to open the floodgates for sugar exports,” said Sergey Gudoshnikov, a senior economist with the London-based International Sugar Organisation (ISO).

“The government is being very cautious. Ensuring access to food for over one billion people is the major priority of the Indian government.”

Views among traders and analysts on Indian sugar stocks vary greatly, but all agree they are at a comfortable level and that mills want to take advantage of high sugar prices.

On October 1, when the current 2011-12 season began, carryover stocks were at 6 million tonnes, up from 5.0 million tonnes in the previous year, according to the National Federation of Cooperative Sugar Factories.

The ISO puts India`s residual sugar stocks, held by industry and households, at around 10 million tonnes, raw value, as of October 1.

The National Federation`s Kumar said the government must permit overseas sales as soon as possible.

He said Indian mills were expected to produce about 26 million tonnes in 2011-12, while domestic consumption was about 22 million tonnes

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