With Brazil crushing most of its cane for ethanol this season, India is slated to be the world’s top sugar producer for the 2018/19 season. And with a lack of fresh fundamentals of any significance, news from India can move the world sugar market, as we saw with the break below 10.00 cents for #11 sugar a few weeks ago. Since then, the nearby sugar contract made a major move to the upside, picking up a full two cents per pound. As the world sugar pricing strengthens while the rupee remains sluggish, Indian mills will have a greater incentive to export more raw sugar. A contracted volume of 150,000 MT of exports was recently announced.

Farmers are a critical voting bloc and sugar milling an important economic sector overall. India’s government continues to juggle policies and proposals to support the sector, from a price-stabilization sugar reserve to adjustments for marketing rules for mills. Various ambitious or large-scale support and modernization plans have been brought forward—many with stated support from one or another government agency or department—but there may be insufficient political capital and will for all to be realized. Cabinet decisions on some proposals, including grower subsidies and a transport subsidy for mills, were put off last month.

These proposals also include a mix of measures intended to encourage ethanol manufacturing, such as tweaking prices for ethanol from different sugarcane-derived feedstocks and managing ethanol transportation costs. Funding assistance may also be forthcoming for expansions of ethanol production capacity, in some ways an easier sell for the ruling government.

Major sugar exporters like Brazil, Australia, and Thailand will be likely—and in some cases have already threatened—to raise complaints before the WTO regarding any explicit subsidies for sugar exports. In recent years, Brazil has already engaged in such measures, pushing Thailand to lift some of its domestic sugar market controls. The various sides disagree on whether subsidies to cane growers qualify as unfair.

At the end of September, cane arrears, payments due to growers from mill groups, were estimated near Rs 130 billion, or about US$1.75 billion.

India domestic sugar pricing & the Indian rupee

Source: DCA, NIC, McKeany-Flavell
Posted by: Information Services
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