LONDON/MUMBAI - Indian raw sugar exports are likely to slow down after world prices softened, with mills prioritising sales of low-quality whites to the domestic and international markets, trade sources said on Tuesday.
They said scaled-back expectations for Indian sugar production in 2015/16 and 2016/17 due to prolonged dry weather, augured for firmer domestic prices.
European trade sources estimated that some 50,000 tons of Indian raw sugar exports had been contracted so far in the 2015/16 (October/September) season, for shipment in the fourth quarter.
The deal had been finalised last week coinciding with a rally in the futures market, they said.
Benchmark ICE raw sugar futures hit a 10-month peak of 15.78 cents a pound on Nov. 24, triggered by expectations that the world market was shifting into deficit after years of surpluses.
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Indian millers and dealers said reduced expectations for Indian sugar production and a rise in domestic prices, meant that output of low-quality whites, with a premium over raws, would make better returns than exports of raws.
The trade was still also awaiting publication of an official statement outlining the terms of an export incentives programme in which the government has targeted exports of 3.2 million tons of sugar in 2015/16.
"In the last three months domestic sugar prices have risen nearly a quarter," said a miller based in Maharashtra, which accounted for most of India's raw sugar exports last year.
"Far-month contracts are trading at a 20 percent premium over spot prices. So instead of selling raws at a discount, I will produce whites and sell at a premium."
The miller added, "If I am producing whites, I can sell it in the local or overseas market, but for raws there is no local market. Whites prices will rise in the domestic market given we are expecting lower production."
A New Delhi-based dealer said, "There is export demand for raw sugar, but mills are not interested in the production."
The dealer added, "They are expecting a rally in local prices due to lower production. That's why they are making only whites."
Claudiu Covrig, senior agricultural analyst at Platts Kingsman, forecast India would export 200,000 tons of raw sugar in the first quarter of 2016, followed by 200,000 tons in the second quarter and 50,000 in the third quarter.
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Covrig said he expected India to export 300,000 tons of low-quality whites in the fourth quarter, followed by 300,000 tons in the first quarter of 2016, and 150,000 tons in each of the next two quarters.
