India may import less sugar than predicted three months ago after global prices surged to a four-year high and the first normal monsoon in three years boosted the outlook for domestic crop.
Overseas purchases may total 1.25 million metric tons in the year starting Oct. 1, the most since 2009-10, according to the median estimate of six traders and analysts surveyed by Bloomberg. That compares with 2.1 million tons predicted in a June survey. Production is seen tumbling 10 percent to 22.5 million tons, the median estimate of another survey of 10 traders and analysts showed.
Futures in New York rallied to the highest since 2012 last month partly on speculation that India, the world’s largest consumer, will embrace imports to meet a domestic shortfall and dry weather and frost will hurt crops in Brazil. Indian buyers may wait for global prices to retreat before importing as the government has taken steps to control domestic prices, according to the Bombay Sugar Merchants Association.
“India will likely need imports as production is expected to fall,” Kona Haque, head of research at the London-based ED&F Man Holdings Ltd., said in an e-mail on Monday. “The amount of imports will depend on what the final crop ends up being, world prices versus local prices and timing of the government’s intervention in import duties.”
Enough Inventory
The Indian Sugar Mills Association estimates supplies next year will be enough to meet domestic demand forecast at about 25.6 million tons with inventory of 7.5 million tons. The group says production will drop 6.8 percent to 23.4 million tons in 2016-17. Stockpiles are sufficient to meet demand and the domestic prices are stable over the past six months, the Food Ministry said in an e-mailed statement on Wednesday.
“Normal rains have made the situation comfortable this year and next,” said Mukesh Kuvadia, secretary general of the Bombay Sugar Merchants Association. “Recovery from cane will be little higher this season. We need imports more as a buffer.”
Most of India got normal or excess rainfall during the four-month monsoon season from June 1, boosting crops from sugar cane to rice and soybeans. The return of normal rains after a two-year deficit spurred farmers to increase the area under cane and sugar production may rebound in 2017-18, according to the mills’ association.
Futures Rally
Raw sugar surged 54 percent this year on ICE Futures U.S. in New York on expectations for two straight world shortfalls. The contract for delivery in March rose 1.2 percent to 23.53 cents a pound by 7:22 a.m. in New York on Wednesday.
“International prices have gone up partially because of anticipating imports from India,” Michael McDougall, senior director at Societe Generale in New York, said in telephone interview on Monday. “There is tightness because of India and reduction in Brazil’s crop.”
The consensus in the market is India will import 1.5 million to 2 million tons of sugar in 2016-17, McDougall said. The global sugar deficit is seen at 4 million tons in the 2016-17 season, which starts Oct. 1 in most countries, more than the July projection of 3 million, Paris-based Sucden & Denrees said on Sept. 30.
“Right now imports are not conducive, it’s not even viable without an import duty,” McDougall said. “It doesn’t make financial sense to import now.”
India increased import duty on sugar to 40 percent tax from 25 percent in April 2015 and subsidized exports during the 2013-14 and 2014-15 seasons to rid of a surplus that depressed local prices and drove mills into losses.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.
