India, the world’s biggest sugar-producer after Brazil, may not export the sweetener for up to three years as high production costs price shipments out of the global market and a drought in major growing regions squeezes output.
A lack of shipments from the country, which exported sugar in the last two years, would support global prices now trading near 2-year lows on a world surplus estimated at about 8 million tonne.
As the world’s biggest consumer of sugar, India is a key player in the global market and shifting weather conditions can make it an exporter one year and significant importer the next.
India’s imports in 2008-09 and 2009-10 drove a near tripling in global sugar prices, while its exports in subsequent years helped to halve prices from a 30-year high. The Indian sugar year runs from October 1 to September 30.
“Current prices are not viable for exports,” Abinash Verma, director general of the Indian Sugar Mills Association (ISMA), told Reuters.
“As of now, no, we are not exporting. If the prices remain the same, then it will not be viable for us to export.”
Indian sugar futures were trading at 3,156 rupees per 100 kg ($581.5 per tonne) by 0456 GMT, while in London May futures settled at $495.60 a tonne on Tuesday.
Global prices are likely to come under further pressure with new season sugar supplies starting in Brazil from April.
“For exports, India needs a sharp rise in global prices, which is unlikely,” said a Mumbai-based dealer with a global trading firm, who declined to be named.
“It is unlikely for India to become a sugar exporter in the next three years.”
Also from April, domestic prices are set to spike as demand from bulk users such as makers of soft drinks and ice-cream peaks with the start of India’s sweltering summer, said Vedika Narvekar, a senior analyst with Angel Commodities Broking.
India's annual sugar output could drop nearly 7% to 24.3 million tonne in the year to September 2013, though this would still exceed domestic consumption of about 23 million, ISMA estimates.
Higher domestic prices mean India is unlikely to find buyers overseas for its surplus sugar . In fact, mills have been importing raw sugar, drawn by lower overseas prices.
India is likely to import 1.5 million tonne of sugar in the year to September 2013 and imports will continue next year unless import duty is hiked, sugar