Top sugar consumer India is expected to produce enough of the sweetener in the coming 2012-2013 productions season to allow exports for the third consecutive year, the head of its sugar mill body said on Monday. India, the world's second-largest producer of sugar after Brazil, was hit by a severe drought in 2009 and had to import about 2.5 million tonnes, sending global prices on a rally. India returned to exports in 2010/11.
Sugar farmers have to date planted 2-4 percent more acres ahead of the 2012-2013 season than they had at the same point last year, Abinash Verma, director general of the Indian Sugar Mills Association (ISMA), told Reuters in an interview. "One thing is certain - the 2012/13 season is going to have surplus sugar, more than the consumption," Verma said. "We expect the government to allow exports for the third year in a row. I do not see any reason for them not to allow exports."
Planting is ahead of last year's rate despite two of the top producing states, Maharashtra and Karnataka, lagging behind the rate of planting of a year ago, he said. Those two states were expected to pick up the pace after a delay due to poor rainfall, he added.
Farmers have completed about 70 percent of the sowing for next year, he said. The cane planted now will be used for the 2012-2013 sugar production season which starts on October 1. It was too early to estimate sugar output for the 2012-2013 season, Verma said. ISMA will make its first estimates based on cane acreage in a couple of months, he added.
India's farm ministry has already made an estimate, forecasting output at 25.0-25.5 million tonnes, little changed from the official estimate for the 2011-2012 year of 25.1-25.2 million tonnes. ISMA is pushing for the government to allow another 1 million tonnes of exports for the 2011-2012 season to help trim bulging inventories. That would bring total exports for the season to 4 million tonnes. India has so far exported 2 million tonnes and agreed to export another 1 million tonnes which is awaiting details of quota allocation to mills.
India's supply to international markets is small compared to the 30 million tonnes each shipped by top exporters Brazil and Thailand, but the flow is contributing to a worldwide glut this year. The global sugar surplus in 2011/12 is estimated at 5.17 million tonnes, the International Sugar Organisation said on February 20, raising its forecast from 4.46 million issued in its previous quarterly update.
ISMA forecasts total Indian output for 2011-2012 at 26 million tonnes, nearly a million tonnes above the government estimate, so the association believes the additional million tonnes of exports could be made without hurting India's stock levels. Indians consume around 22 million tonnes of the sweetener annually.
The government controls exports and is wary of pushing up domestic prices through increased exports and letting stockpiles run down. With a lower estimate for sugar production, it is unclear if the government would allow exports beyond the 3 million already authorised. The government aims for millers to hold around 3 months of consumption, or around 5.5 million tonnes, and that level would be maintained at the start of the next crop year even with the additional exports, he said.
Verma said exports would help Indian mills pay arrears for cane brought in by farmers. In turn, this would encourage farmers to plant more. Mills, sitting on higher stocks than they need, owe 100 billion rupees ($1.92 billion) to farmers. Another million tonnes of exports would help sugar companies earn 30 billion rupees toward payment, he said. "If we want to continue and sustain this kind of sugar production in 2013/14, we have to ensure that farmers get payment on time and the only way to ensure that is exports," Verma said.
Indian ministers are likely to meet on April 25 to discuss the mechanism for exports of 1 million tonnes of sugar agreed for overseas sales on March 26. The ISMA was hoping this would be resolved quickly, Verma said, as the delay in issuing formal export orders was costing exporters money as benchmark global prices have been falling. London white sugar closed at $574.90 per tonne on Friday, down more than 11 percent from $648.80 a tonne on March 26. New York raw sugar prices settled at 21.55 cents per lb, their lowest in 11 months.
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