India to prevent sugar stocking

Labourers weighing cane in an Indian village. The country is facing a shortage for the second consecutive year. (REUTERS)

The Indian government has said that it will bar large sugar consumers from stocking sugar equivalent to more than 10 days of consumption. India, the world's top sugar consumer, is facing a big shortage of the sweetener for the second consecutive year.

The government has taken several steps to fill the supply gap in the past year.

Prices dropped in the first four months of the season that began October 1, worsening a shortage that's doubled retail prices in the world's biggest consumer of the commodity, a producers' group said.

Mills produced 9.7 million tonnes in the October- January period, down from 9.95 m tonnes a year earlier, Vinay Kumar, Managing Director of the National Federation of Cooperative Sugar Factories, said from New Delhi yesterday.

Sugar has more than doubled in the past year, reaching a 29-year high on February 1, as adverse weather reduced output in Brazil and India, the top producers. Global demand for sugar will exceed supply by 13.5 m tonnes this season, according to broker Czarnikow Group.

"The global price outlook for sugar remains strong, with other major sugar-producing regions such as Brazil also seeing a drop in production," Fitch Ratings said in a report yesterday.

Raw-sugar futures for March delivery lost as much as 2.2 per cent to 27.95 cents a pound in after-hours trading in New York yesterday. Yesterday, prices fell 2.8 per cent to 28.58 cents, the biggest drop for a most-active contract since January 27.

In India, immediate-delivery sugar fell for a third day, losing 1.7 per cent to IN3,736.65 (Dh293) per 100 kg, the lowest level in a month. Prices are still up 73 per cent in the past year because of a shortfall in domestic supplies. "The deficit has translated into high prices and Fitch expects prices to remain high," in the 2010 and 2011 seasons, the rating agency said. Prices may ease in the second-half of the next crop year because of a "better visibility of cane output and a declining supply deficit."

For now, higher prices may help Indian producers maintain "strong" earnings, the agency said. Bajaj Hindusthan, India's biggest mill, returned to profit in the three months to December 31 and Balrampur Chini Mills, the second-largest, reported a 49 per cent increase in net income to IR765.5 million. Profit at Shree Renuka Sugars surged to IR2.61 billion from IR110m.

Production next year may jump to 21 million tonnes as farmers plant more acres to benefit from record prices, Kumar said.

 

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