India Buys Raw Sugar for the First Time Since 2006

By Thomas Kutty Abraham

Aug. 27 (Bloomberg) -- Shree Renuka Sugars Ltd., India's biggest refiner, bought 30,000 metric tons of raw sugar from Brazil, the nation's first overseas purchase in 2 1/2 years as domestic production declines.

The sugar is scheduled for October arrival to Haldia, a port on India's eastern coast and the site of the company's 2,000 ton a day mill, which started production in June, Managing Director Narendra Murkumbi said in an interview. The commodity is being bought tax-free for turning into white sugar for export, he said.

Purchases by India, the world's biggest sugar consumer, may bolster global prices, which have climbed 50 percent in the past year. Domestic output may total 22 million tons in the year from October, down from 26.5 million tons this year, the Indian Sugar Mills Association said. The nation last bought sugar in 2005-06.

``Domestic raw material is not available and buying from the spot market in Brazil is more attractive,'' Murkumbi said. ``We may import more raw sugar after December.''

Sugar for October delivery rose 1.1 percent to 14.24 cents a pound today on ICE Futures U.S., the former New York Board of Trade. The price is up 32 percent this year. Refined, or white, sugar for October delivery gained as much as 1.7 percent to $419.50 a ton in London trading, the highest since November 2006.

Shree Renuka signed a three-year contract with Brazil's Grupo Copersucar in 2006 to buy raw sugar. Brazilian raw sugar, priced at about $300 a ton free on board, is cheaper than that sold by suppliers in Thailand, Murkumbi said.

Cheaper Option

``Shree Renuka will be looking to import from the cheapest source and sell refined sugar at the highest price,'' said Kiran Wadhwana, a director at the New Delhi-based International Trading Co. ``A high import duty will prevent imports for sale in the local market.''

Sugar imports for sale domestically are taxed at 60 percent.

Mills in India, forecast to sell a record 4.5 million tons of sugar abroad this year, will halt exports from October to sell domestically, where demand is expected to pick up next month before the Diwali festival in October, Wadhwana said.

Exports may not exceed 1 million tons in the year ending Sept. 30, 2009, because of lower output and as farmers switch to other crops, S.L. Jain, director general of the New Delhi-based Indian Sugar Mills Association, said in an interview last week.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.