NEW DELHI: India may soon permit unrestricted exports of sugar, in a move that could push New York futures from 30 year highs by eliminating uncertainty over the exportable surplus of the world’s second largest producer of the sweetener.
World markets are waiting for exports from India to fulfill rising demand from countries such as Pakistan, Indonesia and Russia, particularly when output from Brazil promises to be lower due to concerns over the weather. On Wednesday, the president of producer group Indian Sugar Mills Association said India was likely to free up sugar exports soon and might also permit export of two million tonnes under its Open General Licence. The OGL is a permit by which India’s exporters are allowed overseas sale of the commodity with no curbs.
Since bottoming out at an annual low of 13 cents per pound on May 7, 2010, New York sugar futures climbed more than 150 percent on Tuesday amid supply worries in top producer Brazil and export uncertainty in India. “There is no concern on production and exports. We will have an exportable surplus of 2 million tonnes under OGL which we expect the government to open up soon,” Vivek Saraogi said.
Shares of Indian sugar firms rose after Saraogi’s comments on the overseas sale of the sweetener, dealers said. Shares of Shree Renuka Sugars, Bajaj Hindusthan, Balrampur Chini Mills, EID Parry and Dhampur Sugar Mills were up 1.18 percent to four percent. “The government may still buy time to free sugar exports and it might not be as soon as expected by millers,” said Chief Analyst at Karvy Comtrade Veeresh Hiremath.
“I strongly believe that government will review the output situation before allowing exports,” Hiremath said. Last week, government sources revealed that India would allow an extra 930,000 tonnes of the sweetener for overseas sale under a different scheme after Nov 15, 2010 bringing total exports since September to 1.5 million tonnes, as global supplies remained tight.
New York prices have surged on rising demand. On Tuesday, the March contract, which climbed 3.85 percent, settled at 33.11 cents per pound, the highest settlement close since early 1981. “We are sticking to our earlier production estimates of 25.5 million tonnes in the current year” Saraogi said. India produced 18.8 million tonnes of sugar in 2009/10. India’s sugar marketing year runs from October to September.
