Low global prices dent sugar export hopes

Prices slump 18% in three months to $613 a tonne.

Suddenly, all the work done by the sugar industry in lobbying the government to allow more exports and in crushing extra cane, has been made irrelevant by the market. For, global prices have been on a steep slide.

Just a short while after the central government said it allowed the industry to ship abroad a million tonnes under Open General Licence, global prices have dropped from $750 a tonne to $613 a tonne in the last three months.

This has happened after a focus on more output. About 2.1 million tonnes has been produced in November as compared to 1.8 mt in the same month of last year. The Indian Sugar Mills Association (Isma) says 350 mills have started operations (it was 355 last year at this time) and though crushing began slightly late, especially in Maharashtra, production this year is 17 per cent higher.

Uttar Pradesh alone has produced 500,000 tonnes in November as compared to 100,000 tonnes for the corresponding month last year. In Maharashtra, where nearly a third of the county’s production comes, the output of sugar was been 1.13 mt by crushing 11.8 mt of cane, compared to 1.04 mt by crushing 11.4 mt of cane in the same month last year.

Ajit Chougule, acting managing director of the Federation of Cooperative Sugar Factories in Maharashtra, told Business Standard: “The recovery (of sugar from cane) is 9.6 per cent compared to 9.2 per cent during the same period (last year). In the current season, 161 mills are participating, compared to 147 last year.”

However, Abinash Varma, secretary-general of Isma, said: “International sugar prices have been continuously falling and there is hardly any premium over the domestic prices for most of the mills. Only mills in the coastal states may still find it slightly viable to export because of lower transportation cost.”

Said the managing director of a big cooperative mill in Maharashtra: “Of the previous quota of 500,000 tonnes of OGL export, around 200,000 tonnes of contracts have been terminated following the crash in global prices. Millers now expect extension of the validity of the previous OGL order from the central government.”