India poised to boost sugar exports to Asia, Mideast
Thursday, 16 January 2014 00:04
India Cabinet to meet 16 Jan. to discuss sugar incentives
Iran, Sri Lanka and Indonesia among likely buyers of India sugar
LONDON/MUMBAI (Reuters): India appears set to increase sugar exports to Asia and the Middle East if, as expected, the Government extends production incentives to cash-strapped mills.
A Cabinet meeting set for 16 January looks set to approve incentives for mills in the world’s second largest producer which have been struggling to pay farmers due to rock bottom prices for the sweetener, trade sources said.
Leading exporters say India could ship 1.5 to 1.7 million tons of raw sugar and 500,000 to 700,000 tons of white sugar in the 2013/14 season if an incentive package is approved.
Jonathan Kingsman, Head of Agriculture at data provider Platts, said there was market talk that the government could move to give incentives to mills equivalent to up to $50 per ton (3,000 rupees) as long as the sugar is exported.
Any additional weight of Indian raw sugar exports to the world market would potentially drag further on global sugar prices, which hit a 3-1/2 year trough of 15.41 cents a lb last week, pressured by abundant global supplies.
“It is difficult to know how much of this has already been priced in the market,” Kingsman said.
He said the Government would need to ensure that any incentives do not fall foul of World Trade Organization bans on export subsidies.
The most likely markets for Indian raw sugar were in Asia, including Indonesia, a top importer, Iran and Sri Lanka, and the Middle East, noting freight costs to these markets were lower for India than key rival Brazil, the world’s top sugar exporter.
Iran could pay a premium for Indian sugar as it has rupee funds received for its exports of oil to India, trade sources said.
If the Cabinet’s decision on incentives is delayed, say into February or later, there will be less impact on the raw sugar market as the cane crush in key growing states such as Maharashtra will have advanced further, trade sources said.
Mills need to make small changes in their machinery to shift to producing raw sugar from producing white sugar, and many mills may decide not to do so as almost half of the crushing season would be over by that time, they added.