India, the world’s second-biggest sugar and wheat producer, may restrict exports to cool a rally in domestic prices as the worst monsoon rains in three years threaten crop planting.
The food ministry plans to ask the cabinet to allow only state-owned companies to ship wheat, cap free-exports of sugar at 1.5 million tons and order mills to sell more sweetener in the open market, a government official told reporters in New Delhi, asking not to be identified, citing policy.
Indian commodity exchanges yesterday imposed special margins on wheat and sugar futures to halt a rally in prices as more than 50 percent of the country faced the threat of a drought. The government doesn’t need to curb sugar exports as the rally in prices has slowed shipments, Farm Minister Sharad Pawar said in an interview today.
“Measures like export restrictions are inevitable because we are heading towards drought-like situation,” said Harish Galipelli, vice president at Kochi-based JRG Wealth Management Ltd., which advises traders. “The yield of crops like sugar will definitely suffer on lower rains. Since production is likely to fall, there is need to alter export policy.”
The September-delivery wheat contract on the National Commodity & Derivatives Exchange Ltd. in Mumbai declined 0.8 percent to 1,417 rupees ($26) per 100 kilograms. Futures rallied 20 percent in July. The August-delivery sugar contract fell 1.7 percent to 3,455 rupees per 100 kilograms. Futures climbed to 3,672 rupees on Aug. 4, the highest level since December 2010.
Traders have contracted to export 1.48 million tons of sugar and 860,000 tons have been shipped since India ended restrictions on overseas sales in May, the government official said. The food ministry plans to ask mills to sell 420,000 tons more sugar in the open market this month to control prices, the official said.
A revival in India’s monsoon, which accounts for more than 70 percent of annual rainfall, in the central and eastern parts of the country will benefit rice, soybean, cotton and sugar cane crops, L.S. Rathore, director general of the India Meteorological Department said today.