Indian imports to sustain 30-year-high sugar prices
Thursday, 13 August 2009
MUMBAI, Aug 12 (AFP): Global sugar prices are likely to stay high in the coming year, analysts say, as India, the world's largest consumer of the commodity, reels from poor monsoon rains that will force it to rely on imports.
India could import more than six million tonnes this fiscal year, its highest in a decade.
That will keep world prices high for a commodity whose supply is expected to fall short of demand by some nine million tonnes globally in 2008-09, according to the International Sugar Organisation (ISO).
In India, sugar has major social and political implications, is a key part of the diet and an essential ingredient for delicacies at religious festivals.
"With the monsoon weak, India's sugar imports could rise to six to seven million tonnes in 2009-10 to meet local consumption demands of 26 million tonnes," said Mehul Agrawal, sugar analyst at equity research firm Sharekhan.
"Each time India enters the global market, prices could spike."
On Monday, sugar markets around the world jumped to highs not seen since the 1980s.
The benchmark raw sugar futures at the New York-based Intercontinental exchange rose five per cent at 22 cents a pound for October delivery-the highest since March 30, 1981.
White sugar prices also increased to a 26-year high in London at 557.4 dollar a tonne.
India had two years of record sugar production between 2005 and 2007, which saw the country export five million tonnes of sugar.
Abnormally large stocks and low prices prompted farmers to shift focus towards crops like soya and cotton, which gave better yield and profit.
This led to a 45-per cent drop in sugar output in 2008-09 as yields fell and forced the country to look overseas to fill the gap.
Now, sporadic rains-or even none at all-during the June to September monsoon, which is vital for sowing many major foodstuffs, including sugar, has caused many farmers to say that crops are going to fail.
Indian share prices also fell this week due to concerns of a failing monsoon. Output in India's biggest sugar-producing state, Maharashtra, could drop to 4.7 million tonnes in the season ending September, the Maharashtra State Co- operative Sugar Factories Federation said.
The second-largest sugar-producing state, Uttar Pradesh, in northern India, has also seen deficit rains this year.
Mills across Maharashtra are expected to delay the crushing of cane by a month, due to the lower availability of the crop.
"Sugar is a hardy crop, but this year will be a difficult one," said Samir Somaiya, president of the Indian Sugar Mills Association (ISMA).
Global and local prices are expected to remain firm because India-once a sugar exporter-is expected to buy in the commodity from abroad for the second year in succession.
India imported 2.5 million tonnes in 2008-09, with the government allowing sugar mills to do so at zero-per cent tax to stabilise prices at the local bazaar.
"We expect London prices to cross the 600-dollar mark in the next two quarters," Sharekhan's Agrawal said, as sugar experts prepared to meet in Singapore next month to determine the outlook for production and prices.
According to Naveen Mathur, associate director of commodities with Mumbai-based Angel Broking, India has been the key player in driving the rise and fall of sugar prices.
"In 2006 and 2007, India was the single-most source of an unprecedented worldwide production glut, leading to a situation where sugar attracted very little fund buying interest," he said in emailed comments to AFP.
"Now, it is India's likely seven million tonne production shortfall -- 15 million tonne output versus 22 million tonne consumption requirement-that is driving up world prices."
In the 12 months to March 2010, India is likely to produce 16-17 million tonnes of sugar, lower than an earlier estimated 19-20 million tonnes, the analysts said.
India could import more than six million tonnes this fiscal year, its highest in a decade.
That will keep world prices high for a commodity whose supply is expected to fall short of demand by some nine million tonnes globally in 2008-09, according to the International Sugar Organisation (ISO).
In India, sugar has major social and political implications, is a key part of the diet and an essential ingredient for delicacies at religious festivals.
"With the monsoon weak, India's sugar imports could rise to six to seven million tonnes in 2009-10 to meet local consumption demands of 26 million tonnes," said Mehul Agrawal, sugar analyst at equity research firm Sharekhan.
"Each time India enters the global market, prices could spike."
On Monday, sugar markets around the world jumped to highs not seen since the 1980s.
The benchmark raw sugar futures at the New York-based Intercontinental exchange rose five per cent at 22 cents a pound for October delivery-the highest since March 30, 1981.
White sugar prices also increased to a 26-year high in London at 557.4 dollar a tonne.
India had two years of record sugar production between 2005 and 2007, which saw the country export five million tonnes of sugar.
Abnormally large stocks and low prices prompted farmers to shift focus towards crops like soya and cotton, which gave better yield and profit.
This led to a 45-per cent drop in sugar output in 2008-09 as yields fell and forced the country to look overseas to fill the gap.
Now, sporadic rains-or even none at all-during the June to September monsoon, which is vital for sowing many major foodstuffs, including sugar, has caused many farmers to say that crops are going to fail.
Indian share prices also fell this week due to concerns of a failing monsoon. Output in India's biggest sugar-producing state, Maharashtra, could drop to 4.7 million tonnes in the season ending September, the Maharashtra State Co- operative Sugar Factories Federation said.
The second-largest sugar-producing state, Uttar Pradesh, in northern India, has also seen deficit rains this year.
Mills across Maharashtra are expected to delay the crushing of cane by a month, due to the lower availability of the crop.
"Sugar is a hardy crop, but this year will be a difficult one," said Samir Somaiya, president of the Indian Sugar Mills Association (ISMA).
Global and local prices are expected to remain firm because India-once a sugar exporter-is expected to buy in the commodity from abroad for the second year in succession.
India imported 2.5 million tonnes in 2008-09, with the government allowing sugar mills to do so at zero-per cent tax to stabilise prices at the local bazaar.
"We expect London prices to cross the 600-dollar mark in the next two quarters," Sharekhan's Agrawal said, as sugar experts prepared to meet in Singapore next month to determine the outlook for production and prices.
According to Naveen Mathur, associate director of commodities with Mumbai-based Angel Broking, India has been the key player in driving the rise and fall of sugar prices.
"In 2006 and 2007, India was the single-most source of an unprecedented worldwide production glut, leading to a situation where sugar attracted very little fund buying interest," he said in emailed comments to AFP.
"Now, it is India's likely seven million tonne production shortfall -- 15 million tonne output versus 22 million tonne consumption requirement-that is driving up world prices."
In the 12 months to March 2010, India is likely to produce 16-17 million tonnes of sugar, lower than an earlier estimated 19-20 million tonnes, the analysts said.