India will consume up to 7 million tonnes more sugar than it will produce in 2009/10, prompting the government to extend permission for duty-free imports, Farm Minister Sharad Pawar said on Wednesday. The world's biggest consumer of the sweetener was likely to produce 16 million tonnes of sugar and consume 22.5-23.0 million tonnes in the new season that began on October 1, Pawar told an annual Economic Editors Conference.
He said the season began with opening stocks of 2.2 million tonnes, down from 10 million tonnes a year ago, adding that the government planned to extend white sugar imports beyond November and raw sugar beyond March. "Sugar stocks in India, the world's largest consumer, will fall to extremely tight levels, prompting a continued need for imports next year," said Luke Mathews, commodity strategist at the Commonwealth Bank of Australia.
Pawar said India would extend permission for duty-free imports of refined sugar beyond November, and raw sugar beyond March this year to ensure smooth domestic supply. The government said on Tuesday that India's cane output was likely to dip 9 percent this year, compared to the previous year, when India produced about 15 million tonnes of sugar and imported 5 million tonnes.
Industry officials say the decline in cane output may be partly offset by higher sugar content, helped by recent rains. The prospects of large imports by India, the world's top consumer and biggest producer after Brazil, has propelled New York sugar futures to their highest in nearly three decades, while Indian spot prices rose 5 percent on Tuesday to a record 3,353 rupees ($71.25) per 100 kg.
"Participants became wary that the high prices may have dampened demand, and a recent lull in (notable) physical activity has contributed to the slight easing in prices," said Mathews of the CBA. "Yet the global raw sugar market remains fundamentally bullish, and we believe new contract highs may be posted within the next three-six months." New York's March raw sugar contract jumped 0.53 cent to end at 23.97 cents per lb on Tuesday, while London's December white sugar contract increased $3.30 to end at $593.80 per tonne.
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