Sugar exports set to miss target

India's sugar exports are expected to be just about half a million tonne in the current sugar year (October-September), said industry experts on the sidelines of Sugar Summit 2006.

"The country has a re-export obligation of about 2 million tonne till September 2007. There was a possibility that the industry will export 1 million tonne by 2006-end and the rest next year. However, as prices are expected to escalate in the next two-three years, it is unlikely that domestic exports will be higher than half a million," said C S Nopany, chairman and managing director of The Oudh Sugar Mills Ltd and president of Indian Sugar Mills Association.

As per ISMA estimates, in the October-January period, India's white sugar exports under the re-export obligation have been less than 1 lakh tonne with most companies waiting for a price rise in the next 2-3 years.

Further, there is a stock shortage scenario globally. The European Union subsidies will go from June 2006, as per the WTO ruling and the world sugar trade will see a shortage in supply by 12-15 lakh tonne.

Pakistan is short by 4 lakh tonne and prices have sky rocketed to Pakistani Rs 45 per kg. In Russia, retail prices have skyrocketed to $680 a tonne.

From $320 a tonne, last August, Brazilian white sugar spot prices are now at $440-450 a tonne. London International Financial Futures Exchange (LIFFE) No 5 white sugar May futures ended at $441 a tonne on Thursday.

India's white sugar exports to Pakistan will be realised at $440-450 a tonne. Further, there are just about 4-5 mills in northern part of the country which hold re-export obligation and this can give them a better price bargain, said a senior industry member.

About 60-65 per cent of the re-export obligation that ends September 2007, is held by south Indian companies and they are not keen on exports to Pakistan owing to high freight costs.

Domestic prices have also firmed up and the prevailing ex-mill prices in Maharashtra are at 1,900 per 100 kg and in Uttar Pradesh about Rs 1,960 per 100 kg. "It is unlikely that prices will slip below Rs 1,900 level this year," said Si Kannan, senior analyst with Sharekhan Commodities.

Further, current domestic prices are moving in tandem with global rates. Thus, selling the produce locally would be a better option, said P Rama Babu, managing director of EID Parry (India) Ltd.

Thus, though there may not be a rush on part of exporters to sell overseas, according an official of The Bombay Sugar Merchants' Association Ltd, the scenario may change after summer when industry prefers to offload most stock before it gets discoloured due to excess moisture conditions.