India Selling Into World Awash With Sugar Threatens Prices

  • Government seen providing export subsidy to boost sales
  • Indian shipments set to weigh on global prices from March

Indian mills may accelerate sugar exports from next month with government subsidies to cut near record inventory, worsening a global glut, according to ADM Investor Services International Ltd.

Shipments may total 2 million metric tons to 3 million tons between November and March, David Sadler, a senior trader with London-based ADM Investor Services, said in an interview in New Delhi on Sept. 28. He expects the government to subsidize exports because of low global prices.

Stockpiles in India have surged to almost 10 million tons after four straight years of decline in global prices and high cane costs deterred exports. The government last month ordered mills to compulsorily ship sugar to cut inventories and boost local prices. Losses at producers may widen because of the mandatory exports as global prices are low, according to Shree Renuka Sugars Ltd., the nation’s top refiner.

India Sugar Prices Trail Production Costs

“Indian exports will impact global prices negatively” and prices in New York may drop to about 11 cents a pound by March, Sadler said. “There are record supplies everywhere. The whole world is awash with sugar.”

Price Rally

Futures in New York have rallied 29 percent since slumping to a seven-year low of 10.13 cents a pound on Aug. 24, partly on concern world production will trail demand in 2015-16. The contract for delivery in March rose as much as 1.5 percent to 13.07 cents on Thursday, the highest level for most-active contract since May 15, and traded at 13.05 cents at 4:44 p.m. in Mumbai.

The Indian Sugar Mills Association said this week that the nation’s production will drop 4.6 percent to 27 million tons in the 12 months starting Oct. 1. That’s still more than enough to meet domestic demand and can add to the 9.6 million tons of inventories from the previous seasons, according to data from the association.

The government last month ordered mills to export 4 million tons of sugar in the 12 months through September 2016 to rid the surplus and prop up domestic prices. N.C. Joshi, a spokesman for the Food Ministry declined to comment on subsidies. The mills association expects the government to help producers pay cane growers Director General Abinash Verma said on Tuesday.

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