Sugar merchants are struggling to sign new export deals, as a surge in domestic prices to a seven-month peak and a firm rupee prompt buyers to wait for cheaper supplies from Thailand, dealers said on Wednesday.
Slower exports by the No.2 producer could support global sugar prices , which have slipped in the past two weeks partly on worries a record Thai output - estimated at 11 million tonnes - will swell an amply supplied world market.
"It is nearly impossible to strike new deals for white sugar. Indian sugar is too expensive," said Kamal Jain, managing director of Pune-based Kamal Jain Trading Services.
"Even in raw sugar, exports have slowed. Only Iran is buying in rupees. Others are not comfortable with current prices."
India is offering white sugar at around $492 per tonne free on board, versus offers from Thailand at $470 for comparatively better grade white sugar, dealers said. Thailand is the world's No.2 sugar exporter after Brazil.
Indian raws are being quoted at $438 per tonne, compared to Thai supplies at $381.
"Two months ago, mills in top producing state Maharashtra were willing to sell sugar below domestic prices. Since the announcement of an exports subsidy for raw sugar, they raised quotes," a Mumbai-based dealer with a global brokerage said.
Indian mills traditionally produce white sugar, but a global glut has made exports difficult. In an attempt to cut down stockpiles, the south Asian country has said it will provide an incentive of 3,300 rupees ($54.82) per tonne for the production of raw sugar for exports.
Rising seasonal demand from ice-cream and beverage makers ahead of the scorching summer months have also contributed to the jump in domestic sugar prices, which hit 3,077 rupees per 100 kg on Wednesday, the highest since August 2013.
"We are entering peak demand season. Prices can move higher from the current level. They are unlikely to fall," said Ashok Jain, president of the Bombay Sugar Merchants Association.
Also, a firmer rupee is prompting merchants to quote higher export prices, he added. The rupee rose to an 8-month top on Wednesday amid hopes of continued foreign fund inflows.
MARKET EYES WEATHER
Traders are now eyeing the weather forecast for more pricing cues. If El Nino returns this summer, it could curb sugar output and further boost prices. In 2009/10, a drought triggered by the weather pattern had forced India to import a record 4 million tonnes of the sweetener.
"There is uncertainty over next year's production. If there is a drought, then local prices will rise sharply. So there is no point in exporting sugar at lower prices now," said a senior official with a Maharashtra based sugar factory.
India exported 1.12 million tonnes in the first five months of the 2013/14 season that started on Oct. 1, including 520,000 tonnes of white and 600,000 tonnes raw sugar, the Indian Sugar Mills Association estimates.
The country had shipped out 348,000 tonnes in 2012/13.
"It would be very difficult for India to push exports in coming months. Some exporters are struggling to execute already signed deals," said a New Delhi-based dealer with an Indian trading firm that is exporting sugar to Iran.
Source:- economictimes.indiatimes.com
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