Sugar mills hold off exports amid declining global prices

Sugar mills are holding off exports because global prices have fallen since the country eased the ban on overseas sales three weeks ago.

White sugar prices in London have dropped 4 per cent after India eased restriction on exports on December 18. Prices may fall further after the government lifts the ban completely by the month-end, making exports unattractive, industry officials said.

"Not more than 25,000 tonne have been sold and I don't see large-scale exports taking place,'' S L Jain, director general of Indian Sugar Mills Association, said. "Price is the issue.''

ISMA represents non-state-owned producers. White sugar prices, which fell to a 12-month low in London on January 4, have slumped 32 per cent from a May peak of $497 a tonne on forecasts of higher supplies.

Mills were expected to ship 1 million tonne, a third of an estimated surplus. The country's sugar production may rise to a record 24 million tonne in the year ending September, Union Minister for Agriculture Sharad Pawar said on January 5. That's 6 per cent more than the 22.7 million tonne estimated by the ministry in November.

India halted sugar exports on July 4 to augment supplies and curb inflation. On December 18, only mills that imported raw sugar duty-free in 2005, under the so-called advance licence to meet a shortage, were permitted to export an equivalent amount.

The ban may be lifted completely in three weeks, Pawar said. Sugar mills in southern India, the biggest holders of the advance licences, may sell at $340 a tonne free on board, while producers based away from the ports in northern states are seeking about $360 a tonne, Sanjay Tapriya, finance director at Simbhaoli Sugar Mills, said.

White sugar for March delivery on Euronext.life gained 1.4 per cent to $337.9 a tonne in London yesterday.

"We have large export obligations and we are committed to meeting them.'' R V Tyagarajan, chairman of Thiru Arooran Sugar Mills, said in an interview from Chennai. "But how soon we will sell depends on prices.'' Thiru Arooran and group company Shree Ambika Sugars together hold licence to export 265,000 tonne of the sweetener.

With Brazil and Thailand expecting bumper harvests, Indian prices have to be competitive, Jain said. "The government may have to find a way to help exporters,'' he said. India will study a plan to provide subsidies to sugar mills to make them globally competitive, Pawar said.