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India to surpass Brazil as top sugar producer, eyes bigger export share

Reuters  |  MUMBAI/SAO PAULO 

By and Roberto Samora

MUMBAI/SAO PAULO (Reuters) - will surpass as the world's top producer next year, with the South American country losing its lead for the first time since the 1990s as its mills allocate increasingly more cane for ethanol production and as low investments dent cane yields.

At the same time, with subsidy schemes for a politically sensitive sector, is expected to churn out a record production of about 35 million tonnes in 2018/19 year starting in October, while Brazil's output could retreat by about 10 million tonnes from a year ago to about 30 million tonnes.

With fuel prices on the rise and prices trading near 10-year lows in New York, the incentive for Brazilian mills to produce the sweetener is low. Indian mills have little option but to produce sugar as their biofuel production capacity is limited.

The change in leadership over sugar production, which has held since the 1990s, is expected to reflect in trade flows around the world, with Brazilian exports losing a slice, while gains a foothold in the global market amid a glut in supplies, especially in

"It certainly looks like India will overtake as the world's largest sugar producer," said Michael McDougall, senior vice president-sales at ED&F Man.

"The big question is how will India deal with the surplus, given the estimate on consumption is around 25 million tonnes."

Along with India, Thailand, the second largest exporter behind Brazil, is in Asia, a major consumer region.

The surplus production will allow India to increase exports, while will remain a major exporter, said Júlio Maria Borges, from Job Economia, adding that Brazilian exports in the new crop year are expected to decline by about 9 million tonnes.

INDIAN EXPORTS

India could start new season with inventory of over 10 million tonnes and could produce another 35 million tonnes in the season, estimates the (ISMA) said.

Total supplies would be around 45 million tonnes against local demand of 25.5 million tonnes, making exports essential from the country, says Abinash Verma, of ISMA.

The industry body has requested the government to make exports of 7 million tonnes mandatory in the next marketing year, Verma said.

"Yes, exports are necessary and we will decide quantum after consulting with all the stakeholders," said an official, who is involved in the decision making.

In March, India asked mills to export 2 million tonnes of sugar and fixed a mandatory export quota for each mill, but mills have so far managed to export around 500,000 tonnes.

"The gap between local and overseas prices is huge and many mills are not exporting surplus despite the government order," says B. B. Thombare, of Natural Sugar & Allied Industries, a sugar mill based in western Indian state of

In the Indian market, mills were selling sugar around $430 per tonne against export prices of around $330, said a with a global trading firm.

India traditionally produces white sugar that has limited demand in the world market. A few mills could produce raw sugar that can be sold easily in the world market, says Thombare.

In August, global raw sugar prices fell to their lowest level in a decade as the dollar rose against the Brazilian real. On Wednesday, raw sugar was trading around 10.87 cents per lb.

A jump in Indian exports could further depress global prices.

"Prices could fall below 10 cents if provides subsidy and sets an ambitious target for exports," said India of a global trading firm, who declined to be named.

(Reporting by in MUMBAI, Jose Roberto Gomes e in SÃO PAULO;Additional reporting by in and Mayank Bhardwaj in NEW DELHI; Editing by Marguerita Choy)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, September 05 2018. 23:33 IST
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