Indian imports not seen affecting sugar prices

India is also expected to remain a large buyer during 2005-06.

'Prices won't hit the roof. The expectation was that India would buy 5.5-6 million tonne (this year). But, now it appears that it would close the season with 2 million tonne, or 2.5 million tonne at the most,' said Sergey Gudoshnikov, senior economist at ISO.

'The quantity is not significant. Also supply is not a problem specially when countries like Brazil are low cost producers,' he added.

In it's quarterly market outlook for February 2005, ISO had said that till the end of the crop cycle in September and even in the last quarter of 2005, 'the price outlook in terms of sugar fundamentals will mainly depend on the situation in the world's two sugar giants, Brazil and India, which will likely overshadow crop and trade developments in the rest of the world'.

During 2003-04, production in India "" the world's largest sugar consumer "" dropped to 15 million tonne in raw value compared to 21.7 million in the previous year. ISO has revised the projection for this year to 13 million tonne. India's sugar consumption during 2004-05 has also been revised downwards to 19.5 million tonne.

According to estimates, India has so far imported around 1.5 million tonne of sugar this season to meet the shortfall in production.

Based on sowing trends, ISO has forecast strong recovery in India's sugar production during 2005-06 but added that the country was unlikely to cover the domestic demand estimated at 18-19 million tonne.

According to ISO's assessment, based on the experience over the last few years, Brazil alone has been able to cover deficits.

In the coming years, capacity was being added in nearly 40 mills in Brazil or were under restructuring, ISO Economist Leonardo Bichara Rocha said adding that nearly 27 mills were being restructured around Sao Paulo alone.

According to the ISO's outlook, the world sugar production is projected to grow to 145.2 million tonne during the 2004-05 (October-September) as against 142.9 million tonne during the last sugar season.

India, Thailand, the United States and Cuba are among the countries where production is expected to drop, while the European Union, Brazil, Russia and Guatemala projected to witness higher production.