INDIA: Imports needed but will wait a while
Published: 03/12/2010, 12:59:11 PM
India will have to resume sugar imports by mid-year to build buffer stocks for its festival season, despite having cancelled deals this week that hammered New York prices down 7% to seven-month lows, according to Reuters.
Imported sugar in the world's top consumer is now cheaper than local supplies for the first time in months, but India needs imports of at least 3 million tonnes to be ready for peak festive season demand in September, analysts and officials say.
Purchases could rise even higher if next season's crush is delayed by a quarrel between farmers and millers over cane prices, as happened this season in a key sugar region.
But India is in no hurry to import, since it is well supplied for now, with production standing at 11.5 million tonnes by the end of February, and purchases later may be more profitable.
"India may have imported a lot of sugar for now but it definitely needs more later to keep a decent buffer, especially to meet a spurt in festival demand," said Veeresh Hiremath, a senior analyst with commodity brokerage Karvy Comtrade.
Supply from local mills, which crush cane from November to March, will suffice to meet demand for a few months.
"I do not see imports in the near future. I see that happening only from May," Hiremath said.
onathan Kingsman, managing director of consultancy Kingsman SA, said cancellation of 100,000 tonnes of imports, particularly by small private white sugar importers, was "entirely possible", though bigger players were unlikely to default.
"The structure of the raws market has changed in the last 10 years, so that the main importers are big refineries at end-destination, and these will not default," he added.
Indian traders said many importers were facing heavy losses and some washouts would continue.
Jack Scoville, senior analyst for brokers the Price Futures Group in Chicago, said washouts may indicate India does not need any more sugar -- a "negative sign" for the market.
But Indian analysts called it a passing phase.
India might wait until June or July to buy sugar to build stocks, even if the London price falls to $470-$500 per tonne and the New York market to 16.5 cents per pound, said Amol Tilak, a senior analyst at Kotak Commodities in Mumbai.
"I see that happening soon, very soon," he added. "Maybe in two weeks, but they will still prefer to wait until June or July." Such a wait would allow Indian importers to space out purchases and avoid a sudden rush that drives up prices.
"I think they'll watch the market stabilise and then come back into it. There's no guarantee the Indians will produce what they need," said James Cordier, a senior analyst for brokers optionsellers.com in Tampa, Florida.
"If the government believes India must have stocks for 3 months, I believe we need another 4 million tonnes of imports," Hiremath said, although some traders said 3 million tonnes might be enough as India's output would rise next year.