Sugar mills to struggle to export raws despite subsidy

Indian mills are likely to struggle to export raw sugar, despite a government subsidy to boost shipments, as global prices remain weak with large supplies from top producer Brazil set to flood the market soon.

Lower exports by India, the world's biggest consumer of sugar, should take some pressure off benchmark New York prices that are mired near a 5-year low of 14.08 cents per lb.

"Not only are the prices unfavourable, most refineries in the world have sufficient stocks, with the pipeline being full. I do not see our exports going beyond 500,000 tonnes," said Dharmender Bhayana, managing partner at Sugrain Trading LLP.

India, which traditionally produces white sugar, exported nearly a million tonnes of raws in 2014.

"We have nearly missed the bus as the government took a long time to approve the subsidy. There is plenty of sugar and supplies from Brazil will arrive in April," Bhayana added.

After months of indecision, India last week decided to give mills a subsidy of 4,000 rupees (USD 64) a tonne for exports of up to 1.4 million tonnes of raw sugar to help cut stockpiles after five years of surplus output.

But given a premium for Indian supplies, traders do not see this subsidy helping much in terms of boosting exports.

Indian raw sugar is being quoted at USD 350 per tonne free on board for exports, versus USD 330 quoted for Brazilian supplies.

Global prices need to rise to make Indian raws attractive, but that looks unlikely in an oversupplied market, said a Delhi-based trader with an international firm.

"We are not very sure if Iran would import as much as it did last year because sanctions are gradually easing. Iran may turn to Brazil also," the trader added.

Iran had bought 500,000 tonnes of Indian raws in 2014, paying with the rupees it received for oil from India amid curbs on dollar trade with Tehran due to sanctions over its disputed nuclear programme.

In the absence of export deals, Indian mills could turn to the local port-based refineries of Shree Renuka Sugars Ltd, EID Parry and Simbhaoli Sugars Ltd. But prices remain an issue.

"Mills are willing to sell raw sugar at 20,000-20,5000 rupees a tonne which is considered high and needs to come down to 19,000-19,500 rupees for refiners to buy from mills," said a Mumbai-based trader who works with an international company.

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