INDIA: Kingsman to explore production and policy at conference
Published: 08/31/2010, 12:56:09 PM
Policies to curb sharp swings in Indian sugar output and the resulting volatility in the country's import demand will be the key theme at an international conference that starts in India on Wednesday, according to Reuters.
Massive imports last year by India, the world's top sugar consumer, hoisted New York raw futures SBc1 to the highest in nearly three decades in February. Now it is set to become an exporter in 2010/11, and is likely to contribute significantly to a global surplus.
"India is very volatile. It has enormous swings in production. This isn't good for India or for the world markets, as it makes planning very difficult," said Jonathan Kingsman, a widely respected analyst and head of Lausanne-based Kingsman S.A. consultancy, which is organising the two-day conference.
The International Sugar Organization has forecast a global sugar surplus in 2010/11, led by growth in Indian output. India is likely to produce 25.5 million tonnes next year, compared with 18.8 million tonnes in the current year ending in September and 14.7 million tonnes in the previous year.
"It's not good for the Indian industry, it's not good for the cane growers, it's not good for competitors. It makes life difficult for everybody, and something needs to be done about that," Kingsman said, referring to the output volatility.
Millers and the government are already working on a possible solution -- liberalisation of the tightly controlled sector.
"The government can help check volatility by allowing good retail prices for mills and good cane prices for farmers," said Veeresh Hiremath, senior analyst with Hyderabad-based brokerage Karvy Comtrade.
Millers say they have held several rounds of discussions with government officials and they expect favourable changes in policies as sugar output is expected to rise due to higher planting and good monsoon rains and local prices are steady.
Over the past few years, Indian sugar output has been on a roller coaster ride, but higher output estimates should give the government a window of opportunity to remove some of the constrains to even out the production cycle, Kingsman said.
"What we are trying to do is talk about what parts of Indian policy can be changed, tweaked, liberalised, so that the market can send better signals to producers. So, you don't get the massive swings in production," Kingsman told Reuters.