India sugar exports get boost from Rupee plunge

Sugar exports from India, the world's second-biggest producer, may jump more than threefold next year as Asia's worst performing currency spurs demand from importers in the Middle East and Asia.

Shipments may exceed 1 million tonnes in the year beginning October 1, said Narendra Murkumbi, managing director of Mumbai-based Shree Renuka Sugars Ltd. Exports from the local crop may total 300,000 tonnes this season, according to the National Federation of Cooperative Sugar Factories Ltd.

Rising Indian exports may add to a global glut and pressure prices in New York heading for a third year of declines, the longest slump since 1992. Worldwide supplies will outpace demand by 4.5 million tons in the 2013-2014 season that starts in October, following a 10.3 million-ton surplus this season, the International Sugar Organisation said yesterday. India's rupee has tumbled 15% this year, boosting prospects for exports of everything from rice to wheat and cotton.

"I am positive about big export volumes in the next season," Murkumbi said in a phone interview. "Exports will be helped by a weak rupee and comfortable surplus. Demand for refined sugar is very strong."

The rupee is the worst performer after Brazil's real among 24 major emerging economies in the past six months on concern that foreign capital outflows will accelerate as the US Federal Reserve prepares to trim monetary stimulus.

Indian exports will probably be 500,000 to 1.5 million tonnes in the 2013-2014 season because of the weak rupee and a fourth year of domestic surpluses, Manish Gupta, head of sugar trading at Olam India Pvt, said this month. A further one million tons will be shipped from refineries that import raw sweetener to re-export it as refined sweetener, he said.

The weakening of the real and the rupee has boosted prospects for exports from Brazil and India, the biggest producers, and may weigh on raw sugar traded in New York and refined sweetener prices in London, according to a trader with Newedge Group in New York.

"Both real and rupee are staying low against the dollar, which means Brazil and India will export more," he said in a phone interview on August 21. "It's definitely going to prevent the market from going up."

Brazil's real has weakened about 19 per cent against the dollar since February 22 and touched a 4 1ô2-year low of 2.4549 per dollar August 21. Raw sugar for delivery in October fell 0.3 per cent to 16.28 cents a pound on ICE Futures US yesterday, while white sugar for October delivery retreated 0.3% to $482.20 a tonne on NYSE Liffe in London.

Ethanol equation
"The most important thing in Brazil is how much cane will be crushed for making sugar and how much will be for ethanol," Oliveira said. "Most likely, more cane will be crushed for sugar compared with ethanol in the second half. We see producers in Brazil trying to take advantage of the weak real by exporting more."

The amount of sugar waiting to be loaded at ports in Brazil rose 7.7 per cent in the week ended August 14, according to data from Williams Servicos Maritimos Ltda. The amount waiting to be loaded at the ports of Recife, Maceio, Vitoria, Paranagua and Santos, the country's biggest, was 1.65 million tonnes, up from about 1.53 million tonnes the week earlier, it said August 14.

Shrinking surplus
"There is a big shrinkage in the global surplus this year because of strong ethanol production in Brazil," Murkumbi said on August 21. "When prices went down we saw strong import demand especially from China. Stronger-than-expected demand and more diversion of cane toward ethanol will be supportive for prices."

India may have a surplus of three million tons in 2013-2014, said Vinay Kumar, managing director of the cooperative federation. An increase in shipments will increase local prices, potentially boosting earnings of mills, which are selling the sweetener at below the cost of production, he said.

Shares of producers advanced in Mumbai trading today. Shree Renuka, the top refiner, rose as much as 2 per cent to Rs 15.60, Bajaj Hindusthan Ltd., the biggest producer, increased as much as 1.6 per cent to Rs 12.75, while Balrampur Chini Mills Ltd, the second-largest, climbed as much as 1.5 per cent to Rs 36.85.

Production next season may exceed output in 2012-2013 after good monsoon rainfall boosted yield prospects, Agriculture Minister Sharad Pawar said August 19. Output will be 25 million tonnes this season and may total 23.7 million tonnes in the year from October 1, according to the Indian Sugar Mills Association.