10-Nov-2013
While the Food and Agriculture Organisation (FAO) has struck a bullish note on sugar in its recent outlook, the Indian industry is striking a different note.
The industry feels that unless 3-4 million tonnes are shipped out of the country, sugar prices are unlikely to stabilise, reversing the downtrend.
FAO last week said that global sugar prices would rise in the coming days on unfavourable weather conditions impacting harvest in Brazil, the largest sugar producer.
Global prices
“Sugar quotations increased by 9 per cent from July to October 2013. Although early in the season, the size of the production surplus remains uncertain, indications are that it will be much smaller than early estimates and not as large as the past two years. If these early assessments prove true as the season progresses, it will certainly lend some upward support to world sugar quotations,” it said.
Global raw sugar prices averaged 19.31 cents a pound during January-June, down 20 per cent over the corresponding period a year ago. However, in September, prices averaged at around 17.4 cents a pound and rose to around 18.7 cents a pound in October.
FAO estimates the global sugar output for 2013-14 at 180.2 million tonnes, marginally higher than last year. It expects bulk of the growth in global output to come from developing countries, such as India, Thailand and Pakistan.
However, FAO said: “India’s competitiveness on the international market is being constrained by rising production costs and falling world prices, which may limit further gains in world markets”. It has pegged India’s sugar output at 25.5 million tonnes for the 2013-14 season, while forecasting exports at 2.1 million tonnes.
Unviable exports
The Indian industry has begun the 2013-14 season with a huge opening balance of 8.5 million tonnes, which is weighing on sugar prices that are in the bearish phase.
Mills are under pressure to liquidate stocks – that’s resulting in excess market supplies dragging the price. “Exports are currently not viable from India, but sugar can be pushed out, provided there is some support from the Government, say, in terms of transport subsidy for both inland and oceanic freight,” said Abinash Verma, Director-General of Indian Sugar Mills Association.
The Government had provided export subsidy in 2006-07 to ship out about 60 lakh tonnes of sugar. Mills in coastal areas then received a subsidy of Rs 1,350 a tonne, while those in the hinterland got Rs 1,450 .
“A subsidy of Rs 1,000-1,500 is good enough to help us export the surplus sugar,” said Verma. Also, the Government could help millers by providing interest-free loans to tide over the current crisis.
Earlier, the Government had extended such interest-free loans in 2007-08 to an extent of Rs 3,500 crore.
Sugar mills currently owe about close to Rs 4,000 crore to farmers for cane purchases made last year. Crushing for the current season is yet to start, as mills are seeking clarity on cane pricing, while farmers are demanding a higher price for their produce. An estimated half a million tonne raw sugar from the new crop has already been contracted for exports, mainly from Maharashtra.
Source:- thehindubusinessline.com
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