India’s total sugar production is estimated to be 28.3 million tonne in sugar year 2014-15 against annual demand of around 24 million tonne. With an estimated 10.2 million tonne of carryover stocks from current and previous years, the total availability in 2015-16 is forecast at a staggering 38.2 million tonne.

This is not the first time that sugar output has exceeded domestic demand in the last five years and the trend is expected to continue in this sugar marketing year (Oct­ober-September) too. Ma­ny analysts think excessive domestic production and large carryover stocks have undermined the initiatives taken by the centre to help the sugar industry.

Attempts to export the commodity have come a cropper because of glut in the international market. India could manage to export barely 1.26 million tonne of the sweetener in the seven months to April. Global sugar production this year is estimated to exceed demand by 620,000 tonne, prolonging the problem of the industry.

India had exported 17.5 lakh tonne of sugar during 2013-14 (October 2013-March 2014) whereas between October 2014 and April 2015, exports stood at 1.26 mt. The export target for 2015-16 is 40 lakh tonne. While the Centre seems to be confident of meeting this target, industry analysts are skeptical.

Kamal Jain of Kamal Jain Trading Services said, "Achieving the target of 40 lakh tonne appears highly doubtful. Even with a bumper subsidy support of up to Rs 5,000 per tonne (if at all given), our rates will be much higher compared with that of Brazil and other countries due to heavy exchange rate fluctuations. There are indications that Brazil may cut prices for raw sugar to 8-9 cents/lb. This will bring down costs to below $300 per tonne. In the given situation, the export plan is likely to fail. It may succeed only if we can gain market access like Brazil. But this is doubtful, since our exporters have no links for selling raw sugar directly to refineries and leading overseas institutional buyers, like makers of beverages, confectioneries and other food products.”

Further the idea of bartering sugar for pulses may not prove effective. This idea was floated recently by Union commerce and industry minister Nirmala Sitharaman, who felt India may get pulses from African countries, Myanmar and Canada in exchange of sugar in a barter deal. Since these countries are not big sugar consumers, the scheme may not prove as effective as it sounds.

Jain said, “It is virtually impossible to structure barter or counter-trade deals in a commodity which is exposed to high price volatility and with countries that have no clue how the counter-trade works. Millers and users in Sudan, Somalia, Tanzania and Sri Lanka are in no mood to wait for their governments to understand the theory of barter. Neither does the Indian government have any readily available proposal from any country to barter sugar against specific commodities.”

The sugar industry of Brazil is also facing serious complications. More than 100 factories in the Latin Amer­ican country have either been closed or are on the verge of bankruptcy. There is a growing fear that the sugar business in the busy October-March period may suffer a serious blow. This, in turn, may brighten up business opportunities for India during 2015-16. But one has to wait and watch till October.

Emkay Commotrade said sugar futures traded on a higher note amid talks of exports with the help of subsidies and hopes of a rise in demand ahead of festive season, like Ganesh Chaturthi and Raksha Bandhan. Sugar prices are likely to move up in the short term due to overall bullish sentiments on expectation of a rise in exports as well as domestic demand.

Kotak Commodities said the price rise could not sustain. "Overall, the long-term trend looks bearish for sugar,” it said.

Source:- mydigitalfc.com