India, the biggest sugar user, may permit exports of 500,000 metric tons as output tops demand for the first time in three years and after food inflation slowed to a two-month low, industry officials said.

The government may take a decision as early as this week, Jonathan Kingsman, managing director of broker and researcher Kingsman SA, and Abinash Verma, director general of the Indian Sugar Mills Association, told a conference in Dubai today.

Supplies from the country may help cool food costs, which reached a record in January, according to the United Nations’ World Food Price Index. Raw sugar soared to 36.08 cents per pound in New York on Feb. 2, the highest level since 1980, on concern that global supplies will lag demand after a storm in Australia and drought in Russia crimped harvests.

The global market “has become viable for exports from India at a time when the country has a surplus,” said Verma. “We are pretty positive that the government will take a decision this week” as food inflation has eased, he said.

May-delivery raw sugar fell 1.5 percent to close at 28.42 cents a pound on ICE Futures U.S. in New York on Feb. 18. Prices have still doubled since the end of May.

India allowed the shipment of 500,000 tons under the so- called open general license in December and then kept the plan on hold because of high food costs. An index measuring wholesale prices of farm products including rice and vegetables rose 11.05 percent in the week ended Feb. 5 from a year earlier, the trade ministry said in a statement last week. The measure gained 13.07 percent the previous week.

Group Meeting

A ministerial group may meet tomorrow to decide on allowing exports, the Press Trust of India reported today, citing no one.

“India should first allow 500,000 tons and then look at permitting at least 1 million ton more,” Vinay Kumar, managing director of a producers’ group that accounts for almost half of the nation’s output, said in an interview at the conference.

The country’s production may total 24.5 million tons, more than the demand of 23 million tons, for the season ending Sept. 30, according to the government. Output for the period may be 25 million tons, exceeding consumption of 22.1 million tons, Verma said, matching Kumar’s forecast. There may be a surplus of 6.7 million tons at the end of September, of which 5 million tons will be carried over to the new season from Oct. 1, Verma said. That leaves 1.7 million tons for sales overseas, he said.

Production was 26.4 million tons in 2007-2008, the last time that output surpassed consumption, data from ISMA show.

Feb 20^th, 2011

Source: Bloomberg

 

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