Sugar exporters have defaulted on around 50,000 tonnes of shipment orders in the past month because of a sudden price spurt in the domestic market, making exports unviable.
Around 75 per cent of the four million tonnes allowed to be exported as surplus has been shipped out this sugar year (October 2011-September 2012). A commitment had already been made for another 600,000 tonnes of export, while contracts are yet to be signed for the remaining 400,000 tonnes. Of the 600,000 tonnes of signed contracts, exporters had stopped implementation of firm orders for around 50,000 tonnes and more default was possible, said a senior industry official.
While deficiency of the monsoon rainfall (15 per cent in July) is estimated to hit the standing long-duration sugarcane crop, sowing has got delayed for the short-duration crop affecting overall output estimates negatively. This has led to a price spurt at home. On the other hand, prices have fallen abroad, with Indian white sugar in Asian spot markets being offered $620-630 a tonne, translating to Rs 3,500 a quintal. Considering an ex-factory price of Rs 3,350–3,400 a quintal, in addition to Rs 150-200 a quintal of fobbing charges, the total pre-shipping cost is Rs 3,500–3,600 a quintal, making exports unviable.
Consequently, exporters are focusing on the market at home. “The domestic market is much better now. So, it is good for all of us,” said Narendra Murkumbi, managing director of India’s largest sugar refiner, Shree Renuka Sugars Ltd (SRSL). Its refineries are still working but from this month, it has planned to import raw sugar from Brazil and re-export after value addition.
According to Mohan Gurnani, chairman of the Bombay Sugar Mills Association, prices have risen by Rs 300–350 a quintal in the past month, luring exporters to change their business decisions.
Sugar prices moved up, albeit marginally, on Wednesday at the Vashi wholesale market here due to increased demand from stockists and bulk consumers to meet higher retail consumer offtake for the coming festival season. With a Rs 10-20 price rise, the benchmark M-30 variety is quoted at Rs 3,531-3,551 a quintal.The S-30 variety also edged up, to trade between Rs 3,491 and Rs 3,572 a quintal.
“For inland sugar companies like us, exports would become viable at not less than $750 a tonne, due to high cost of transportation. However, the viability of sugar exports would be lower for port-based companies. But, the current rally in the domestic market makes local sales remunerative, as the price is set to stabilise at this level in the near future,” said G S C Rao, executive director, Simbhaoli Sugars Ltd.
