Sugar exports to Asian nations may go up

EU supplies likely to fall on lower production, says USDA report

India may increase sugar exports to neighbouring countries this year (October 2006-September 2007) as the European Union supplies are estimated to deteriorate on the back of lower production, according to a recent USDA report. The domestic sugar market is enjoying with comfortable stock on account of surplus production and healthy opening stocks.

EU's production is estimated to slip in 2006-07 to 16.48 million tonne (mt) from 21.85 mt last year. Similarly, EU's exports is also expected to decrease to 1.6 mt from 5.6 mt last year.

Among other major sugar-producing countries, Brazil, China, Indonesia, Thailand and the US will witness a substantial increase in output to 30.34 mt (27.08 mt), 11.10 mt (9.60 mt), 2.2 mt (2.1 mt), 6.2 mt (4.8 mt) and 7.5 mt (6.7 mt), respectively, this year.

With an estimated opening stock of around 5.5 mt, supplies in the domestic market will remain high with anticipated higher output of about 22.33 mt (20.32 mt) in 2006-07.

The USDA report estimates that exports from Brazil will increase by 2.2 mt, while Thailand and India will increase exports by 1 mt and 9,00,000 tonne, respectively. However, exports from Australia are expected to decline by 4,00,000 tonne on the back of the Cyclone Larry

damage. The total world sugar production and consumption will increase by 4.6 mt to 149.2 mt and 1.9 mt to 145.7 mt, respectively, in 2006-07.

According to the International Sugar Organization (ISO), demand in the 2006-07 sugar year (October-September) will increase by 1.9 per cent, lower than the 10-year average of 2.4 per cent, and the lower demand growth is mainly attributed to China's resistance to high sugar prices. High sugar prices have led to the return of artificial sweeteners in China.

According to an analyst, global sugar consumption growth may shrink as some developing countries have cut imports in response to the increase in prices that reached a 25-year high last month. Worldwide consumption will reduce by 1.6 per cent in the year ending September 30 compared with 2.2 per cent in the previous year. Good sugar production exerted downward pressure on both the spot and the futures markets in February and March.

The Directorate of Sugar ordered conversion of 29,427 mt of unsold non-levy free sale sugar of 22 sugar mills of Uttar Pradesh and Uttaranchal into compulsory levy sugar as some sugar mills were releasing less quantity of free sale sugar "� lower than their monthly quota. The April prices turned bullish as they responded to the news of the government allowing exports from the 10 per cent quota allocated as levy sugar.

The government is considering allowing the State Trading Corporation to export around 3-4 lakh tonne of white sugar. The international market has been seeing a bullish trend on the back of huge deficit reported by the ISO in 2005-06 at over 2 mt.

Cyclone Larry hit one of Australia's biggest cane-growing regions in north Queensland, destroying crops, which would have produced an estimated 5,00,000 tonne of sugar and wiping out 10 per cent of the country's sugar production for the season. The ISO has made a downward revision of the world sugar production deficit estimated at only 9,60,000 tonne, based on a better crop in India and Thailand.