India seen as 'swing factor' in world sugar market

by Ron Sterk
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The potential need to import sugar makes India the “swing factor” in the world sugar market.

DANA POINT, CALIF. — The potential need to import sugar makes India the “swing factor” in the world sugar market after a relatively stable beginning to 2017, said Tim Worledge, director for agriculture pricing at S&P Global Platts.

“India will probably turn into a net importer in 2017,” Mr. Worledge said at the International Sweetener Colloquium held Feb. 27 in Dana Point. He said Platts forecasts sugar production in India at 20.2 million tonnes in 2016-17, compared with industry estimates mostly ranging from 20 million to 20.5 million tonnes, with consumption forecast at 25.5 million tonnes. Sugar production in India has been reduced by back-to-back years of drought.

India needs to import 1.5 million tonnes of sugar, while still drawing down domestic stocks, Mr. Worledge said, but probably won’t move to reduce its sizeable import duty until after state elections begin March 11. He suggested India likely would import white (refined) sugar rather than raw due to the time frame involved.

Adding to India’s complicated picture were consumers’ reduced discretionary money after a currency devaluation and the possibility that sugar may be smuggled in from Mayanmar, thus circumventing the import duty, he said.

Despite the situation in India, world sugar prices as reflected in nearby New York world raw sugar futures have been relatively stable at around 21c a lb so far in 2017 after peaking at a five-year high in 2016 at just over 24c a lb due to speculative buying, Mr. Worledge noted.

Prices the past few days have tumbled below 20c a lb on technical selling, ideas Brazil will produce adequate new crop supplies and delays in India’s import decision, according to trade sources.

However, weather remains the main concern as new crop harvest nears in Brazil, the world’s largest sugar producer and exporter. There’s more upside than downside price risk, Mr. Worledge said.

In other markets, Mr. Worledge said that should the United States end the North American Free Trade Agreement, it would need to increase imports under World Trade Organization agreements, and Mexico would need to sell sugar on the world market, noting that about 35% of U.S. sugar imports come from Mexico. 

In the European Union, Mr. Worledge said 2017 was a “year of evolution” with the end of the E.U. sugar program, which will make the E.U. one of the most unregulated markets in the world. He noted recent gains in E.U. sugar beet production, and indications that production may rise sharply as controls come off. At the same time, he said farmers were aware of the “catastrophic” deregulation of the E.U. dairy industry that has resulted in nearly halving the number of dairy farms in the past four to five years.
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