India Must Export Sugar to Gain From Tight Supplies.

Aug. 4 (Bloomberg) -- Sugar mills in India, the world’s second-largest producer, must be allowed to export to benefit from a “squeeze” in global supplies that fuelled the best monthly advance in 21 years in July, a producers’ group said.

Producers should be issued permits to ship 967,000 metric tons against licenses they hold before the start of the new season on Oct. 1, said M.N. Rao, deputy director general of the Indian Sugar Mills Association, or ISMA.

Resumption in Indian exports after a two-year gap may help ease a global shortfall estimated at 8.5 million metric tons by the International Sugar Organization. Raw-sugar reached 19.88 cents a pound on Aug. 2, the highest intraday price since March 15, as Asian demand increased and shipments from Brazil, the top producer, were delayed by rain.

“There’s no better time to export as there’s a squeeze in global supplies,” Rao said in a phone interview from New Delhi.

October-delivery refined sugar dropped as much as 3 percent to $529 a ton on NYSE Liffe in London today. Prices jumped 25 percent last month, the most since June 1989. Raw-sugar futures for October delivery plunged as much as 3.4 percent to 17.95 cents on the ICE Futures U.S.

“We predict that prices will come under downward pressure as the market’s supply squeeze dissipates in the fourth quarter,” Luke Mathews, an agricultural commodities analyst at the Commonwealth Bank of Australia said in a report.

Net Importer

India will have enough supplies to ship at least 1 million tons in the year beginning Oct. 1, Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., said July 7. The country last exported sugar in the 2008-2009 season and has since been a net buyer. Mills with the so-called advance export permits may be allowed to ship 967,000 tons of white sugar from December, a food ministry official said June 2.

“Some mills may produce raws for exports next season to cater to sugar refineries in the region,” Rao said.

The country may produce 25.5 million tons in the new season starting Oct. 1, compared with 18.7 million tons estimated this year, according to ISMA. Cane output may increase to 370 million tons from 313 million tons a year earlier as higher acreage and widespread monsoon rain boost yield, the group said July 26.

“There’s a forecast of a large crop next year and there should be no concern about supplies,” Rao said.

Source : businessweek.com