Indian sugar mills are not signing further export contracts in the ongoing 2021-22 marketing year due to a fall in global prices to below 20 cents per pound level, industry body ISMA said on Thursday.
Indian Sugar Mills Association is the premier sugar organization in India. It establishes a connection between Government and Sugar industry. The prime objective is to ensure that the functioning of both private and public sugar mills in the country is done through government policies.
Given the high cost of sugar production due to the increase in local cane price and prevailing domestic ex-mill prices of sugar, millers may enter the global market for further export of sugar only after international prices rose to around 21 cents per pound, it said.
India is the world’s second-biggest sugar producer and the higher output could weigh on global prices. So far this year, Indian sugar mills have already contracted for export of 35 lakh tonnes of the sweetener and much of it was signed when the global prices of raw sugar were ruling in the range of 20-21 cents per pound, said in a statement.
“However, with a fall in the global prices to below 20 cents, and now to around 18.6 cents per pound of raw sugar, the Indian sugar mills are not coming forward to sign further export contracts,” the Indian Sugar Mills Association (ISMA) said.
Most of the export contracts undertaken for shipment of 35 lakh tonnes are from sugar mills of Maharashtra and Karnataka, it said.
It further said the ex-mill sugar prices in north India are slightly higher when compared to western and southern parts of the country, and therefore not many export contracts have taken place from the northern region.
Also, the pressure on sugar mills to immediately contract for further exports is less considering that a substantial quantity of around 34 lakh tonne of sugar-equivalent is estimated to get diverted into ethanol production, it said.
“Therefore, it seems that the sugar mills will wait for an upward revision of the global prices to around 21 cents or more,” it added.
According to ISMA, sugar production has reached 47.21 lakh tonne across the country in the first two months till November of the ongoing 2021-22 marketing year, compared with 43.02 lakh tonne in the year-ago period. Sugar marketing year runs from October to September.
The production so far is higher due to the early commencement of sugarcane crushing in western India. Sugar production in Maharashtra increased to 20.34 lakh tonne till November of this year, up from 15.79 lakh tonne in the year-ago period.
Sugar production in Uttar Pradesh remained lower at 10.39 lakh tonne as against 12.65 lakh tonne; while that in Karnataka, the production rose to 12.76 lakh tonne as against 11.11 lakh tonne in the said period, it added.
ISMA said crushing operations in all the other states have also begun and the pace of crushing is picking up.
With regard to the supply of ethanol to oil marketing companies (OMCs), the industry body said ethanol makers have offered to supply 414 crore litres of ethanol in recently opened bids for the 2021-22 ethanol year (December-November).
Out of this, 333 crore litres has been offered by the sugar industry based on B-heavy molasses and sugarcane juice as feedstock.
The OMCs have finalised and issued letters of intent for signing contracts with the ethanol manufacturers for 317 crore litres of ethanol supplies against the offer of 414 crore litres in 2021-22, it said.
ISMA also shared that the OMCs have floated the second expression of interest (EOI) for another 142 crore litres, for which the last date of submission is December 3 this year.
The global sugar processing market is expected to grow at a close to 2% CAGR from 2021 to 2027, owing to the high demand generated by the food and beverages industry. Moreover, the Indian government is planning to invest approximately USD 5 billion over the next few years to increase ethanol production by 80%.
