Global sugar tumbles on Indian export incentives

White sugar fell to the lowest since November 2005 in London after India, the world's second-biggest producer, agreed to subsidise exports of the sweetener.

The Election Commission approved a government plan to build a sugar stockpile and provide subsidies to exporters, a trade body said today. India will pay exporters up to Rs 1,450 ($34.50) a tonne for transportation costs to the ports, Agriculture Minister Sharad Pawar said March 29 in New Delhi.

Domestic sugar prices have fallen by more than a fifth in the past year because of record output, reducing local producers' earnings. This prompted the government to lift a ban on exports in July to stop the prices from sliding.

"Obviously that is not bullish,'' Elizabeth Miller, director of research at RedTower in Aberdeen, said in an e-mail today. "It suggests that the market will run into selling whenever prices start to push higher.''

Sugar for August delivery on Euronext.liffe in London declined $1, or 0.3 per cent, to $319.50 a tonne as of 12:35 pm local time. Indian output will reach a record 26.1 million tonne in the year ended September 30, according to C Czarnikow Sugar. It may export 1.5 million tonne through September, the London-based sugar broker said in a report.

Prices have slipped 34 per cent in the last year on signs that Brazil, India and Thailand, the world's biggest producers of the sweetener, will grow more crops.

News about dwindling Russian imports also weighed on the prices. Russia, the world's biggest sugar importer, will buy 2.95 million tonne in the year ended September and 3.15 million in the 2008 marketing year, down from an October 2006 forecast of 3.4 million for both the periods, according to a report by the US Department of Agriculture.

The world sugar harvest that ends in September will rise 6.4 per cent to 161.8 million tonne, Helmut Ahlfeld, managing director of the Ratzeburg, Germany-based commodities research company FO Licht, said last month.

Total sugarcane production will rise to 65 million tonne in the 2008 marketing year from 63 million this year, the US Department of Agriculture said on April 13.

Among other so-called soft commodities, cocoa in London rose 7 pounds to 1,047 pounds ($2,103) a tonne and coffee gained $18 to $1,600 a tonne.

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SWEET NOTHINGS

The government will pay exporters up to Rs 1,450 ($34.50) a tonne for transportation costs to the ports

Domestic sugar prices have fallen by more than a fifth in the past year because of record output, reducing local producers' earnings

The world sugar harvest will rise 6.4 per cent to 161.8 million tonne