After having contracted to supply three-fourths of the allocated export quota of sugar, Indian sugar mills are holding on to the remaining portion expecting prices of the sweetener to go up.
Export prices have come down by about 3-4% from their peak, after India allowed shipments starting November 5 following a fall in global sugar futures prices.
Although the current export prices are still higher than the domestic market prices by 12-13%, millers are in a wait-and-watch mode as there are still five and a half months left to export the allocated quota.
Global sugar futures have slightly moved downwards as production from Brazil is expected to be higher than expected. However, it is still not clear if the downward trend in the international market will stay for a longer period, said traders from multinational trading houses. This is reflected in the still bullish sentiment of Indian export trading.
The Indian government in November announced a quota of 6 million tonnes of sugar for exports. Some supply shortness in the international markets resulted in Indian sugar getting a high premium.
As against the ex-mill price of Rs 33/kg in the domestic markets, the export price for the same sugar had hit a high of Rs 40/kg, higher by 21% over the local prices. High prices had resulted in some sugar millers defaulting on their export contracts signed prior to November at lower rates.
Currently, exporters are offering Rs 37-39/kg. “However, after having seen the price of Rs 39-40/kg, millers are now holding on to the remaining quota expecting to get higher than the last traded price,” said a trader of an MNC export house, who did not want to be named as he is not allowed to speak to the media.
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