India, the biggest sugar buyer, raised the minimum price that millers must pay growers by 7 percent as it seeks to boost production and pare imports. Cane farmers will receive 139.12 rupees ($3.10) for 100 kilograms for the 2010-2011 season starting Oct. 1, compared with 129.84 rupees this year, the government said.
India, the largest user of sugar, imported record amounts last year after a drought parched cane fields, sending futures in New York to a 29-year high in February. A slump in global prices since the peak won’t deter millers in the Asian nation from paying growers more than the floor price, as they vie to secure raw-material supplies, according to Pranshu Mittal, an analyst at Mumbai-based Centrum Broking Pvt.
“India may still import next season to build inventory” even as output rises, he said. “Mills will be paying more.”Output in Uttar Pradesh, the nation’s biggest grower may surge 35 percent to 7 million tons next year, Shyam Lal Gupta, secretary-general of the Uttar Pradesh Sugar Mills Association, said in an interview.
India has taken steps to increase supplies by extending the window for duty-free imports of raw and refined sugar until Dec. 31, ordering bulk consumers to hold inventories for no more than 10 days from 15 days previously and getting mills to sell on a fortnightly basis.
The measures have led to prices at Vashi in Mumbai, India’s biggest wholesale market for sugar, to decline by about a third from a record 4,050 rupees per 100 kilograms on Jan. 8. The cost fell to 2,740 rupees , the lowest since Aug. 6.
“Some mills may report losses in the coming quarters as prices have fallen sharply,” Centrum’s Mittal said.The stock brokerage last month recommended selling shares of Bajaj Hindusthan Ltd., India’s biggest producer, and Shree Renuka Sugars Ltd., the top refiner, and lowered Balrampur Chini Mills Ltd. and Triveni Engineering & Industries Ltd. to “hold” from “buy,” amid the slump in prices.
India’s production in the year ending September may total 18.5 million tons and rise to 23 million tons in the 2010-2011 season, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said this week.
The country may have a deficit of 1.8 million tons even as the world supplies exceed demand by 6 million tons, Centrum said in March report.
