India Lifts Sugar Exports Ban as Production Rises

Mumbai: India, the world's second-biggest producer of sugar, lifted a six-month ban on exports of the sweetener as production heads for a record. A bumper sugar cane crop has helped inventories return to 'comfortable' levels, allowing shipments, Finance Minister Palaniappan Chidambaram said in New Delhi today. A resumption of exports from India may extend losses in global prices. Sugar, the best-performing commodity in 2005, declined in New York and London. A drop in oil prices, which makes ethanol processed from the crop less attractive as an alternative fuel, also contributed to the slide. 'Global sugar prices are not going anywhere in the short term,' said Atul Chaturvedi, president at Adani Enterprises Ltd., a commodities trader. That is 6 percent more than the 22.7 million tons estimated by the government in November.

Indian mills may hold off exports because of a slump in world sugar prices, analysts said. Companies are expected to ship 1 million tons this year, according to Peter de Klerk, an analyst with London-based C. Czarnikow Sugar Ltd. Refined sugar prices in London have slumped by a third from a May peak of $497 a ton on forecasts of higher supplies. Global supply may exceed demand by 5.1 million metric tons this year, according to C. Czarnikow. 'I don't think global prices are viable,' said Amol Tilak, an analyst at Kotak Commodities Services Ltd. 'Exporters will have to cope with competition from Brazil and Thailand' which are expected to have bumper harvests. White sugar futures on London's Euronext.liffe fell as much as 0.7 percent to $329 a ton. Raw sugar on the New York Board of Trade declined 0.4 percent to 11.08 cents a pound after falling as much as 1.5 percent earlier. India halted sugar exports July 4 to augment supplies and curb inflation. On Dec. 18, only mills that imported raw sugar duty-free in 2005 under the so-called advance license to meet a shortage were permitted to export an equivalent amount. So far, about 25,000 tons have been sold overseas, SL Jain, director general of Indian Sugar Mills Association, said January 9. 'I don't see any shipments beyond fulfilling the export obligation,' Tilak said.

'Falling oil prices, which directly influences ethanol, is already putting pressure on sugar.' Crude oil fell below $53 a barrel for the first time in 19 months after a report showed that U.S. fuel consumption plunged to the lowest since April 2004. Futures touched $52.94 earlier today in New York, the lowest since June 9, 2005. Prices are down 16 percent from a year ago. India's sugar output may rise to a record 24 million metric tons in the year to September, Agriculture Minister Sharad Pawar said on 5th January. That is 6 percent more than the 22.7 million tons estimated by the government in November and has increased the pressure to boost exports and avoid a domestic glut.

Sugar prices for immediate delivery have fallen 17 percent to 1,609.60 rupees ($36) per 100 kilograms on India's National Commodity & Derivatives Exchange since July 4. Shares of sugar mills, which were among India's worst stock-market performers in 2006, rose today on speculation the cabinet may end the ban, helping stem a drop in domestic prices. Bajaj Hindusthan Ltd., India's biggest sugar producer by market value, gained 2.3 percent to 201.55 rupees when trading ended on the Bombay Stock Exchange. The stock fell 30 percent last year. Balrampur Chini Mills Ltd., the second-biggest, rose 2.4 percent to 81 rupees, while Shree Renuka Sugars Ltd. gained 2.7 percent to 443.2 rupees. Balrampur shares fell 28 percent last year, while Shree Renuka dropped 16 percent. 'Freeing exports will help steady local prices,' Adani's Chaturvedi said.

- Pratik Parija and Thomas Kutty Abraham
(With reporting by Kartik Goyal in New Delhi)
Bloomberg
11th January 2007