Global Agriculture

Traders sign deals to export around 615,000 tn sugar at $355/tn FOB

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 23 December 2020, New Delhi, IN: It has only been a week since the Centre announced the sugar export subsidy policy for the ongoing season and Indian sugar traders have signed deals to export nearly 615,000 tn sugar, according to various trade sources.

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Deals were signed at freight-on-board price of $355-$375 per tn for export of raw sugar, and $385-$395 per tn for whites, sources said.

“Whatever quantity has been contracted is for (export to) Indonesia at 120-140 points New York premium… Uttar Pradesh has alone contracted some 450,000-500,000 tn raws as of yesterday (Monday),” an official with a multi-national trade house told Cogencis.

Even though the food ministry has not yet released the mill-wise allocation of export quota, Uttar Pradesh–the largest producer–is using the opportunity and signing deals on a daily basis, while Maharashtra–the second largest producer–is not.

“Mills are awaiting the fine print from the government… Maharashtra has excess stocks, yet they are not signing export deals and are demanding higher prices despite making distress sales in the domestic market… which is clearly an unsmart move,” a Mumbai-based exporter said. 

Most mills in the western state are selling sugar below the government-mandated minimum selling price of 31 rupees a kg, but are unwilling to sign export deals at 31.0-31.5 rupees.

This year, the Centre has announced the export subsidy scheme for sugar mills with a delay of over two and a half months due to the weak state of government finances. For 2020-21 (Oct-Sep), it has approved subsidy of 35 bln rupees for exports of 6 mln tn of the sweetener.

Subsidy provided on exports will be 6 rupees per kg and will cover handling, upgrading and other processing costs, international and internal transport and freight charges on sugar limited to Maximum Admissible Export Quantity for the entire season.

In the previous season, the central government had agreed to provide a subsidy of 10.45 rupees per kg on exports of up to 6.0 mln tn of sugar. This helped make the Indian product competitive and the final export figure touched a record high of 5.8 mln tn.

Even with the delayed policy announcement, the industry is hopeful of exporting 4.5-5.0 mln tn sugar this season.

According to the World Trade Organization’s Agreement on agriculture, India can give subsidies on transportation, freight, marketing, handling and processing of sugar till 2023.

The government has been subsidising exports of sugar to help clear the surplus in the domestic market and support domestic prices.

Without government support, it is tough for Indian sugar to penetrate global markets due to the gap between domestic and international prices. 

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