Temat: Sugar prices in India, the world's second-biggest...

Indian sugar prices to rise 3-5 pct by May
Fri Jan 4, 2008

By Mayank Bhardwaj

NEW DELHI (Reuters) - Sugar prices in India, the world's second-biggest producer, are expected to rise 3-5 percent by May because of lower than forecast output and higher exports, a senior trade official said on Friday.

Better prices will provide succour to farmers in India and boost sentiment worldwide after a bumper crop in the year that ended in September last year gave the country more than half of the global surplus sugar, and depressed prices across markets.

Output in the current year will be 28-29 million tonnes, lower than earlier forecasts of 32-33 million tonnes but little changed from the previous year's record 28.4 million tonnes, Vinay Kumar, director general of the National Federation of Cooperative Sugar Factories, said.

"Production will be less than what we were thinking and exports are looking up," Kumar told Reuters in an interview. "We expect prices to go up by 50-75 rupees per 100 kg by April-May."

Prices are currently at around 14,000 rupees per tonne, down from 15,500 rupees a year ago. Traders say global sugar prices are currently around $300 per tonne.

Heavy rains in Maharashtra and a dispute over prices paid to cane farmers in Uttar Pradesh which delayed crushing are expected to crimp production from earlier forecasts.

Kumar said output next year would be lower as depressed prices in the past few months would dissuade farmers from growing more cane, which usually takes about 10 months to a year for harvest. Indian farmers grow cane round the year.

"We expect a production of 24 million tonnes next year," Kumar said.

Mills have been scouring export markets to lighten their stockpile, often clinching deals that gave them little or no profit, he said.

India has exported 2.5 million tonnes of sugar since April, Kumar said, adding the country would likely sell 3 million tonnes this year and almost half of it would be raws.

From a traditional seller of white sugar, India has now emerged as a major exporter of raws, challenging Brazil, the world's top sugar producer.

Kumar said Indian Sugar Exim Corp, the trading arm of private sugar mills, has so far contracted to export 675,000 tonnes of raws and around 200,000 tonnes have already been shipped.

"But demand for white sugar has been low so far this season," Kumar said.

He said a clutch of export incentives announced by the government helped mills to snare deals despite around 9 percent slump in global prices over the past year.

"Had the government not helped us, it would have been impossible to export due to low global prices which have improved but are still less than Indian prices," he said.

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