Sugar makers in India are signing deals with traders and exporters on optimism that the government will soon announce overseas sales quotas for the season that starts this month.
Mills in the South Asian country, which vies with Brazil as the world’s top sugar producer, have so far contracted to export about 1.2 million tons and aim to ship as much as 8 million tons in the 2022-23 year, according to Rahil Shaikh, managing director of trading company Meir Commodities India Pvt.
“The golden opportunity for us is to export between November and May amid a lower crop in Brazil,” said Shaikh, whose company traded about 500,000 tons of sugar in the domestic and overseas markets in the 2021-22 season. “There is a shortage of white sugar and the market is tight globally.”
Indian producers are seeking to take advantage of the rally in benchmark futures amid concerns supplies will tighten, mainly in top exporter Brazil. Rain in the Center-South region of the South American nation, the main growing area, has slowed the pace of cane crushing potentially, boosting prices.
Exporters are offering Indian mills about 35 rupees (43 cents) per kilogram for low quality white sugar compared with the domestic price of 33 rupees, while raw sugar is attracting a price of 33.5 rupees from international buyers, Shaikh said. The refined variety is fetching 38.5 rupees from overseas buyers compared with a local market rate of 36 rupees, he said.
Among destinations for raw sugar are Indonesia and Bangladesh, while low quality white sugar can be sold to the Horn of Africa region, Sri Lanka and Afghanistan for direct consumption, with good demand now, Shaikh said. The refined variety can be sold to Sudan, Somalia and the Middle East, he said.
Domestic sugar production is forecast at 35.5 million tons this year, while consumption is seen at 27.5 million, according to the Indian Sugar Mills Association. India was the top sugar exporter after Brazil in 2020-21 and counts Indonesia, Bangladesh, Malaysia and Dubai among its customers.
“The government should not be worried about domestic supplies. It should allow exports soon,” Shaikh said. “Whenever they feel control is needed they can always restrict, like they did last year.”