UPDATE 2-India eyes more sugar exports, may hit world prices

Last Updated: Sat, Mar 24, 2012 20:11 hrs

* Sugar output in 2011/12 seen 25.1-25.2 mln tonnes

* Traders have exported 3.5 mln tonnes common rice

* Wheat exports since September total 570,000 tonnes (Adds quotes, context)

By Mayank Bhardwaj

NEW DELHI, March 14 (Reuters) - India could allow up to 1 million tonnes more unrestricted sugar exports in early April, a food ministry source said on Wednesday, potentially pressuring already weak global prices.

India, the world's second-biggest producer and largest consumer of sugar, has already allowed two million tonnes of sugar exports in the year that began on Oct. 1 and expects output to far outstrip demand.

"We've bumper production and more sugar exports can be allowed. Anything between 500,000 to a million tonnes could be allowed," the ministry source said, on condition of anonymity.

He added the step to permit more exports under the country's Open General Licence (OGL) scheme could be taken at the next meeting of ministers empowered to decide on the issue, which could be early in April.

According to the food ministry's latest estimates, India is likely to produce 25.1-25.2 million tonnes of sugar in 2011/12, the source said, slightly below trade estimates of around 26 million tonnes.

Demand typically runs at around 22 million tonnes but a poor monsoon can hit production and in 2009 India had to turn to international markets to import, sending global prices soaring.

"There is scope for additional exports. Stocks are comfortable for consumption. Additional exports will not create any scarcity in local market," said Ashok Jain, president of the Bombay Sugar Merchants Association.

Global sugar prices, which hit a two-month low earlier this week, could come under further downward pressure from extra Indian imports.

On Wednesday, London May white sugar futures were down 0.27 percent to $639.6 per tonne.

The key April sugar contract on India's National Commodity and Derivatives Exchange provisionally closed up 0.28 percent at 2,820 rupees ($56.4) per 100 kg before news of the possible extra exports.

Jain said allowing exports would support domestic prices.

"(The domestic) sugar price has fallen despite allowing exports of two million tonnes. Sugar millers are making losses due to higher cane price. Considering that the government should allow additional exports. It will support prices," he said.

Global markets have factored in fresh sugar exports from India as market players had pegged this year's exportable surplus at about three million tonnes.

"For the moment there's no reaction. It was more or less expected for the last month," said Pierre Sebag, director of Sugar K. Ltd, London-based trader.


Separately, the source said the panel of ministers could also allow more exports of common grades of rice.

"We are in a position to export some more rice and wheat," the source said.

India, the world's second-biggest rice and wheat producer, is sitting on huge grain stocks due to bountiful harvests in the past few years.

On Feb. 1, wheat stocks at government warehouses were 23.4 million tonnes and rice inventory was 31.8 million tonnes, sharply higher than respective government targets of 8.2 million and 11.8 million tonnes.

Farmers are preparing for further bumper crops in 2011/12.

Farm Minister Sharad Pawar last month said 2011/12 wheat output would exceed the current official forecast of 88.31 million tonnes due to favourable weather. Rice output is estimated at 102.75 million tonnes.

Demand for rice is usually around 90 million tonnes a year while wheat consumption runs at about 76 million tonnes.

At the moment, there is no official cap on wheat or rice exports after a ban, in place since 2007, was eased last year.

Rice sales have been brisk, while wheat exports have been sluggish because of low global prices.

Traders said they have shipped out about 3.5 million tonnes of non-basmati rice since September, when the export ban was eased, but they could sell only 570,000 tonnes of wheat. (Additional reporting by Rajendra Jadhav in Mumbai and Michelle Martin in London; Editing by Jo Winterbottom and Anthony Barker)

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