Just 5LT export fails to halt global price rise as sugar hits 30-yr high.

NEW DELHI: India’s decision to allow export of just 5 lakh tonnes of sugar has pushed global prices of the sweetner to a 30-year high.

India is the world’s second largest producer of sugar. The export restriction announced last week, despite good production at home, has created an apprehension that supplies will remain tight until February-March when the Brazilian crop arrives in the market. Brazil is the world’s largest sugar producer. Global prices are also driven by concerns that production in Brazil will fall to an 11-year low this season.

"It is doubtful whether even this 5 lakh tonne will reach the international market in time to make an impact on supply,” an industry representative said. “At this price, there are no takers for white sugar." He said prices would have fallen marginally if India had allowed 1 million tonnes of export. This would have given the industry a chance to take advantage of the global surge in prices, he added.

Traders normally welcome a rise in international prices but this time they are apprehensive over the time the government may take to clear the modalities for actual exports.

“Even at lightning speed, our paltry quantity of sugar will reach ports only in the third week of January. That could be too late for optimum gains," a Delhi-based sugar trade monitor said. The global market has the capacity to absorb up to 1.5 million tonnes of sugar from India before the doors open to Brazil’s production, he said.

The industry, however, is relieved that the government has finally taken a policy decision on exports.

"The fundamentals are that there is surplus sugar at home,” said A Verma, director general of the Indian Sugar Mills Association. “This has to be exported within the next two months or else we will face a situation where the carryover into the next year will be higher than this year.”

Verma said 2011-12 will be another year when India will have an excess sugarcane crop and a glut would have implications for the food sector.

Source : economictimes.indiatimes.com