Sugar exports may surge as mills rush to pay growers

Sugar exports from India will climb more than forecast previously as mills accelerate sales to clear $2.8 billion debt to cane growers.

Shipments will surpass one million tonnes in the 12 months through September, said Yatin Wadhwana, managing director of Sucden India. Mills may export about 400,000 tonnes of mainly white sugar between now and September, he said. Wadhwana's forecast for full-year sales compares with 800,000 tonnes predicted by the Indian Sugar Mills Association last month.

Inventories in India are poised to jump to a seven-year high after production outpaced demand for a fifth year and a slump in global prices slowed exports. With another bumper crop in the making and the government threatening action against producers for not paying farmers, mills are selling below production cost to clear dues. That could weigh on futures in New York which slumped to a six-year low this week.

"Mills are forced to sell at a loss because of government's pressure to pay farmers on time," Sanjeev Babar, managing director of the Maharashtra State Cooperative Sugar Factories Federation, said by phone from Mumbai on Monday. "We don't have enough money to run the mills."

Factories owed farmers about Rs 181 billion ($2.8 billion) as of June 15, according to the mills association. Under the law, factories are required to pay farmers within 14 days of supplying cane, Babar said. Failure to pay on time would entitle growers to 12 per cent interest on dues and the government can seize sugar stockpiles and auction them to pay the farmers, he said.

Prices on the ICE Futures US fell to as low as 11.35 cents a pound on Monday, the lowest since January 2009. The contract for October delivery rose 1.1 per cent to 11.55 cents a pound in New York on Wednesday while prices in Mumbai were 0.9 per cent lower at 2,165 rupees per 100 kg.