India’s mills need to export 6 to 7 million tonnes of sugar without government incentives in 2021/22 to bring down inventories and ensure domestic prices remain firm despite surplus production, a government official said.

Sugar exports by the world’s second biggest producer could cap global prices, which hit a 4-1/2 year high this month on expectations that supplies from top producer Brazil will decline as a result of drought and frosts.

“Sugar mills should take benefit of higher international prices and export maximum quantity,” Subodh Kumar Singh, joint secretary at the Department of Food and Public Distribution said on a webinar on Tuesday.

After shipping a record 7.2 million tonnes of sugar in the previous season, Indian mills have so far signed contracts to export 1.8 million tonnes in the 2021/2022 marketing year from Oct. 1, he said.

Afghanistan and Sri Lanka were among key buyers, but demand from both has been constrained by local factors and mills need to find new markets that were relying on Brazil, Singh said.

Global raw sugar prices need to rise above 20 cents per lb to ensure India exports 5 to 6 million tonnes in the current year as the government is not providing a subsidy, Marex Spectron analyst Robin Shaw told the webinar.

New Delhi has discontinued an export subsidy in place for the last three years.

Sugar mills are likely to divert 3.5 million tonnes of sugar to produce ethanol in the current year and that will limit production to 30.5 million tonnes, but it would be higher than local consumption of 26.5 million tonnes, Singh said.

Exports and diverting to ethanol production could lower the sugar stockpile to 7 million tonnes at the start of the next marketing season, from 9 million tonnes this year, he added.
Source: Reuters (Reporting by Rajendra Jadhav; Editing by Alexander Smith)