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Domestic sugar price increase slows down pace of India’s sugar export deals

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Indian sugar mills’ interest in signing export contracts has waned after an increase in domestic sugar prices started giving better returns.

Domestic sugar prices have improved by about 9% in a month’s time to touch Rs 3,430/quintal ex-mill for S30 grade sugar on the back of strong demand for festivals and a relatively empty pipeline.

Sugar from India will be in demand this year help keep a check on global prices of the commodity.

India has signed a contract for export of 1.2 million tonnes of sugar, with Uttar Pradesh mills accounting for only 16% of the share due to strong profitability in domestic trade.

Global sugar prices have been rising over concerns that Brazil’s sugar production will be low this time due to frost. This has bettered the prospects of India’s sugar exporters.

Sugar is one of the key food commodities along with wheat and vegetable oils that has been driving global food inflation figures upward. The FAO Sugar Price Index recorded a 9.6% increase in August–the fifth consecutive monthly increase and the highest level since February 2017.

In 2020-21, India exceeded its sugar export target of 6 million tonnes with government subsidy. Millers exported an additional 12 lakh tonnes without subsidy as export realisations improved. This prompted the central government to advise sugar mills to increase exports even in 2021-22 without subsidy.

According to Praful Vithalani, president of All India Sugar Traders’ Association, India has signed contracts for export of 1.2 million tonnes of sugar for the 2021-22 sugar year (October-September). “Of the total sugar contracted for exports, about 70% is raw sugar and 30% is old white sugar,” said Vithalani.

Rahil Shaikh, managing director, MEIR Commodities said, “Of the export contracts signed so far for export of 12 lakh tonnes of sugar, about 2 lakh tonnes of contract have been signed by mills from Uttar Pradesh, while the rest is from mills in Maharashtra and Karnataka.”

Maharashtra-based sugar broker Abhijit Ghorpade said mills in the state are in the ‘wait and watch’ mode. “As domestic prices have improved giving better returns than the export realisations, millers have preferred to wait till October to get a clarity about global stocks and expected price movements,” Ghorpade said.

As the new season of sugarcane crushing will begin only after rains recede, there is still time for production of raw sugar to begin.

“Once there is clarity about the final production figures of Brazil, which is expected by the end of October, we may see an increase in signing export contracts,” said Shaikh.

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