Pakistan has approved the export of sugar for the first time in nearly three years, spurred by an expected surplus of more than 1 million tonnes, but the move is unlikely to affect the global market, which has priced in rising output in other countries.

Pakistan was forced to import about 1.2 million tonnes of sugar in 2010 after production fell to 3.1 million tonnes from the 2009/10 crop year, when many farmers switched to more profitable crops.

“The government has approved the export of 100,000 tonnes of sugar, but the modalities of export have not been worked out yet,” Khizer Hayat, a spokesman of the state-run Trading Corporation of Pakistan, told Reuters, referring to white sugar.

“We are waiting to see if it will be done through private channels or by government corporations.”

Last year, Pakistani millers sought permission from the government to export up to 500,000 tonnes of refined sugar because of expectations of a bumper crop, which could exceed 5 million tonnes.

“We expect the sugar surplus to be 1.5 million tonnes, given the current domestic consumption,” a Ministry of Commerce official, who wished to remained anonymous, told Reuters.

Trade sources, speaking to Reuters on the sidelines of the Kingsman sugar conference in Dubai, said Pakistan may decide to allow a further 300,000 to 500,000 tonnes of exports later, while most of the 100,000 tonnes of whites would be shipped to Afghanistan.

“It has come as a surprise that Pakistan has so much sugar,” Jonathan Kingsman, Managing Director of consultancy Kingsman SA, told Reuters.

“They (Pakistanis) will be willing to chase sugar prices lower to be able to place that sugar into the export market. If their production is as good as it seems to be, they could export 500,000 tonnes.”

Trade sources at the Kingsman conference estimated that Pakistan’s 2011/12 sugar production was between 4.5 million and 5.1 million tonnes, while annual domestic sugar consumption was seen at 4.2 million tonnes.

But analysts said global sugar prices were expected to be steady at current levels as the market factored in more supply from India, Brazil and Thailand.

India, the world’s number 2 sugar producer after Brazil, has a sugar surplus of 3 million to 4 million tonnes available for export in 2011/12.

India, which had allowed 1.5 million tonnes of exports under a scheme called Open General Licence (OGL) in the 2010/11 crop year ending September, recently issued a formal order for unrestricted exports of 1 million tonnes.

“I think short-term, basically I am looking at sugar to be trading in a range. I mean, for the short term, prices could be pressured because of the (global) surplus, but longer-term, I think, prices should be quite stable,” said Lynette Tan, an analyst with Phillip Futures in Singapore.

“Sugar is a very important commodity. You can see some of the governments probably even going into stockpiling programmes.”

March raw sugar futures on ICE rose 0.46 cent to end at 23.94 cents per lb on Friday after Labor Department data showed the US economy created jobs at the fastest pace in nine months in January, far outstripping analysts’ expectations.

Courtesy: Dawn