Global Sugar Prices Dip To A Three-Month Low, Export Margins Crash.

PUNE: With international sugar prices dropping to a three-month low, margins in Indian sugar exports have shrunk considerably. Mills which were selling their export quotas for up to Rs 900/ quintal are now ready to give them up for Rs 650/quintal but there are no buyers.

Global sugar prices are down 19% this month while raw sugar has fallen 8% last week alone. India is expected to have the highest output in four years in the new marketing season starting October 1. The government had allowed export of 1.5 million tonne when prices began to drop below the production cost.

Shipment of one million tonne is over while the final tranche of 0.5 million tonne is being exported now. Release orders have been issued for over 0.35 million tonne sugar.

"There is so much volatility in the market that buyers are refraining from entering the market. The export price has declined by about $100/tonne since the export of the third lot of five lakh tonne started this month. The market needs stability. If the rupee appreciates even by 1%, it means sugar will become cheaper for the buyer," said an analyst at one MNC commodity trading company.

Ajay Sahai, director general and chief executive officer, Federation of Indian Export Organisations , said, "As more than 70% of sugar exporters cover their risks, they are not going to be affected by the slide of the rupee." India is expected to produce around 26 million tonnes of sugar , highest in the last four years, due to higher area under cultivation and a favourable monsoon.

"Despite the downward revision in Brazil's sugar output, international sugar prices are declining continuously in the last 2-3 weeks as the Indian production which is estimated to be higher is expected to fill this gap in the global markets," said Vedika Narvekar, senior analyst from Angel Broking. Narendra Murkumbi, managing director of Shree Renuka Sugars , declined to comment on the volatility in the futures market.

"The margins in sugar exports are declining slowly. But there is still some margin in the exports over the domestic price. If we are able to export about 3-4 million tonne till February, the declining futures prices may not impact the local prices much," said ISMA director general Abinash Verma. The industry is expecting that the government will announce the export policy after the festival season in October.

Source : economictimes.indiatimes.com