Nov. 14 (Bloomberg) -- India, the world’s second-biggest sugar maker, plans to increase production of raw variety to boost exports and trim a domestic glut, a mills’ group said.
Raw sugar will account for as much as 70 percent of an estimated 3 million metric tons of exports in the year started Oct. 1, said Abinash Verma, director general of the Indian Sugar Mills Association. That compares with shipments of 111,000 tons, or about 30 percent of total exports in 2012-2013, according to the association.
Production in India is poised to top demand for a fourth year, adding to inventories that surged to the highest level in five years, according to the association. Mills are seeking to increase exports to trim losses even as cane costs climb and prices in New York head for a third year of declines, the longest slump since 1992.
“If raw sugar is exported in huge quantities from India, it is bearish as it adds to the world supply,” Cyrus Raja, general manager at Dubai-based Al Khaleej Sugar Co., said in e-mailed response to questions from Bloomberg News. More than 1.5 million tons of raw sugar may be exported this year if futures traded above 19.5 cents per pound, he said. Sales will be mainly to buyers in the Middle East, he said.
The contract for delivery in March fell 0.2 percent to 17.77 cents a pound on ICE Futures U.S. today. Futures have lost 8.9 percent this year, extending a combined 39 percent decline in the previous two years. White sugar futures on the National Commodity & Derivatives Exchange Ltd. in Mumbai tumbled to a 16-month low on Oct. 12.
“The global market is looking for more of raw sugar from India than white sugar,” Verma said. “If India has to grab market share, it will have to produce and export more of raws.”
Global supplies will be 2 million tons bigger than demand in the 2013-2014 season as consumption advances, according to Czarnikow Group Ltd. Futures will need to rise to 22-23 cents a pound to sustain investment in the industry in the biggest producing nations and avoid future shortages, it said Oct. 22.
Mills in Maharashtra and Karnataka states, which produce more than 45 percent of India’s sugar, are keen to produce raws, said Ravi Gupta, a president at Shree Renuka Sugars Ltd., the nation’s biggest refiner. Raw output may exceed 1 million tons this season, he said.
“Supplies may not be the issue but market volatility may bring performance risks and logistics shall play a critical factor,” Gupta said.
Al Khaleej, the world’s largest refinery with a capacity of 7,000 tons per day, will keep buying raw sugar from India as long as it was competitive with Brazilian supplies, Raja said. The company has contracted to import 100,000 tons of raw sugar from India since Oct. 1 for delivery between December and March, he said. The refiner buys 2 million tons of raw sugar globally every year.
Production in India may total 25 million tons this year, compared with 25.1 million tons a year earlier, while local consumption is seen at between 23 million tons and 23.5 million tons, according to the millers’ group. Stockpiles at the start of 2014-2015 season will jump to 10 million tons from 8.85 million tons this year if the nation fails to export any sugar, the group estimates.
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