Sugar May Rise as Biggest Slump in 22 Years Lures Buyers, Simbhaoli Says

Raw sugar may rebound as the biggest slump in 22 years attracts buyers amid signs that global demand for the commodity exceeds supply, according to Simbhaoli Sugars Ltd. and other Indian producers.

“The market will come back with solid foundation because physical buyers will become active,” Sanjay Tapriya, finance director at Simbhaoli, a 75-year old mill, said in a telephone interview today.

Raw-sugar futures tumbled the most since July 1988 on Nov. 12 as speculation that China will raise borrowing costs roiled commodity markets. Prices reached a 29-year high on Nov. 9 as drought and floods damaged crops in Brazil, Russia and Pakistan.

“Brazil hasn’t improved its production and China, Russia and Pakistan are still looking at imports,” said Abinash Verma, director general of the Indian Sugar Mills Association. “This demand is expected to be met from India. There is nobody else filling that gap. Thailand’s exports are lower than last year.”

The global raw-sugar surplus may be 2 million tons in 2010- 2011, down from 3.22 million forecast two months earlier, Sergey Gudoshnikov, economist at the London-based International Sugar Organization, said in an interview Oct. 26.

Exports from Thailand, the second-biggest supplier, may be 4.4 million tons in 2011, compared with 4.63 million in 2010 and 5.1 million in 2009, Secretary-General Prasert Tapaneeyangkul said in an interview today.

Raw-sugar prices climbed 23 percent this year before the three-day slide that ended with futures plunging 12 percent to 26.21 cents on ICE Futures U.S. on Nov. 12. Wholesale prices in Mumbai have lost 20 percent this year.

‘Abnormal’

“There will be loss of profit in exports” after the slump, said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, a group that accounts for about half the nation’s output. “The fall was sudden, abnormal.”

India’s government will decide on ending curbs on exports completely after Nov. 21, Farm Minister Sharad Pawar said last week. The country may have a surplus of 3.5 million metric tons in the year than began Oct. 1 after keeping aside 4 million tons for the next season, he said.

“It’s strategic for India to export at this point of time as we are likely to produce more,” Tapriya said.

Shares of Simbhaoli Sugars fell as much as 2.6 percent to 47.1 rupees in Mumbai trading, tracking declines in stocks of rival producers. Bajaj Hindusthan Ltd., the biggest mill, lost as much as 3.3 percent to 126 rupees, a third day of losses. Balrampur Chini Mills Ltd., the second-biggest, slumped as much as 7 percent to 83 rupees, the most in more than six months, and Shree Renuka Sugars Ltd. shed as much as 5 percent to 87 rupees.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net;

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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