Sugar prices have declined by nearly $50 per tonne in international markets for the first time in two months, and this could impact the Indian sugar sector, industry people said.

On Thursday, world market prices of refined sugar were $423 per tonne, while crude sugar was trading at 17 cents per pound. On June 8, the price of refined sugar was $467. The price of crude sugar then was 17.80 cents per pound.

The sugar industry had predicted that production would decline this year due to the drought in Brazil. Sugar prices in international markets have been rising for the past couple of months as the demand for ethanol was expected to increase and Brazil’s shift towards more ethanol will also have an impact on sugar production, industry people said.

“The supply of sugar from Brazil to the world market was declining due to the stagnant growth of sugarcane owing to lack of rains. But in the first week of June, Brazil received an average of 15-20 mm of rain. This saved the damaged sugarcane,” Abhijit Ghorpade, a sugar exporter, said.

The sugar season in India has just concluded and about 35 lakh tonne additional sugar has been produced compared with last year. Sugar export agreements are in full swing. Prices in global markets have come down in anticipation of surplus sugar from India entering the international market, Mukesh Kuvediya, general secretary, Bombay Sugar Merchants, said.

With the possibility of rains, more than three million tonne of sugar is expected to enter the market, traders said. Currently, up to 35% of the sugar season is over in Brazil. Kuvediya said it would be difficult to predict the state of sugar in the world market until the sugar season reaches 70% and the monsoon season plays out completely.

India, however, is likely to export another 5-6 lakh tonne under the open general licence, he said. Sri Lanka has banned sugar imports due to excess stocks and so there is not much scope there, he explained. Although the price of sugar in the global market has come down, it is expected to remain low only for a short period, trade sources said.

Source : Financial express