Indian mills gear up to make raw sugar for export as global prices rally

Strong demand for raw sugar as Brazil's output drops; traders so far sign contracts to export 725,000 tonnes of sugar

Indian mills are planning to make raw sugar at the beginning of the new marketing season starting Oct. 1 as a rally in global prices to 4-year highs boosts demand for so-called raws from overseas, six industry officials told Reuters.

Indian mills traditionally produce white sugar for local consumption and make small amounts of raw sugar for exports.

But potential supply tightness in world markets in the December quarter after drought and frosts hit the sugarcane crop in top exporter Brazil prompted Indian mills to plan production of raw sugar for overseas sale.

"We are planning to start the season with raw sugar since it is easier to export than white sugar. Prices are also attractive and they are likely to remain firm," said B.B. Thombare, president of the West Indian Sugar Mills Association.

Exports from India could cap global prices and help boost supplies in Asia as the world's biggest exporter Brazil is likely to harvest a smaller crop than last year.

Mills have contracted to export around 725,000 tonnes of raw sugar and 75,000 tonnes of white sugar for shipment in November to January, dealers said.

However, although many mills in the western state of Maharashtra have decided to produce raw sugar for export they are not selling it in advance on expectations that prices will rise further overseas, said a Mumbai-based dealer with a global trading firm.

"Mills want to sell on the spot basis instead of signing advance contracts," he said.

Exporters are willing to buy raw sugar at around 32,000 rupees ($431) per tonne from mills, but producers are not ready to sell, said Praful Vithalani, president of the All India Sugar Trade Association (AISTA).

India could export at least 6 million tonnes of sugar in 2021/22 compared with 7.1 million tonnes in the current year, Vithalani said.

Strong export demand has also lifted local sugar prices by 10% since mid-July to the highest level in nearly four years.