India Ups Sugar Exports to Iran, Asia; Takes Share from Brazil
Wednesday, March 12, 2014

By David Brough and Rajendra Jadhav, Reuters

Indian mills are exporting more raw sugar to Iran and Asian markets, aided by a production incentives package and recovering world prices, seizing market share from top exporter Brazil.

"There is a strong flow of physical trade from India, helped by the rally in world sugar prices, export incentives and rupee clearing," said Jonathan Kingsman, head of agriculture at data provider Platts.

Cash-strapped Indian mills, which have struggled to pay cane farmers due to weak global sugar prices, received a boost last month when authorities approved an incentives package amounting to 3,300 rupees per tonne to stimulate export sales from substantial stocks.

A senior European trade source estimated Indian mills sold some 315,000 tonnes of raw sugar to Iran from December to March, and that a further 200,000 tonnes of Indian raw sugar had been sold to local traders in Iran.

According to Indian industry estimates, mills could sell an additional 250,000 tonnes to Iran this season.

Their exports have been primarily to Iran, with the further financial incentive of a so-called rupee clearing mechanism amounting to some $15-30 per tonne premium to Indian mills. The mechanism uses funds from rupee accounts set up with funds from sales of oil by sanctions-hit Iran to India.

Kingsman said Bangladesh and Malaysia were among other markets where India had made sales at the expense of Brazil.

ICE raw sugar futures rose to a four-month peak earlier this month due to concerns that drought in Brazil could hit output, making exports more attractive for Indian mills.


Naim Beydoun of Swiss Sugar Brokers said he believed Indian raw sugar sales to Malaysia and Indonesia were possible in coming months if the product was competitive in quality terms.

He also said offers of Indian raw sugar on the international market would erode physical business from top exporter Brazil.

"If you take the Indian subsidies, the availability of Thai sugar, and the sugar price going up, this is not conducive to Brazilian cash prices being firm," Beydoun said.

Brazilian prompt high quality raw sugar was offered at a discount of 25 to 30 points to May futures on ICE this week, signalling subdued cash demand.

India, the world's top sugar consumer and number two producer after Brazil, can swing from net exporter to importer. When India exports the sweetener it typically sells low quality whites to regional markets.

India exported 1.2 million tonnes of sugar from October to February, including 500,000 tonnes of raws, according to the Indian Sugar Mills Association.

(Reporting by David Brough and Rajendra Jadhav; Editing by Nigel Hunt and David Evans)

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