Brazil, Australia join forces to fight India sugar subsidy

AUSTRALIAN and Brazilian sugar industry groups have joined forces and are working together with their respective governments to prepare a formal complaint to the World Trade Organisation over any possible sugar export subsidy by India, a top Brazilian sugar official has told Reuters.

Eduardo Leao, executive director at Brazil's cane industry group Unica, says Brazil and Australia view any subsidy by India, set to take over as the world's largest sugar producer this year, as a grave threat to a recent price recovery.

Leao told Reuters late on Tuesday that the two countries reached a consensus regarding the need to act at WTO level if India moves to award sugar producers with an export subsidy.

Analysts and sugar traders are expecting such a move by India as the country looks to put in the market a large local surplus built after a record crop this year, and amid expectations for another big output in the coming season.

"We have heard comments that India could launch a export subsidy," Leao said. "It is not admissible, we would seek an action from the Brazilian government," he added.

Raw sugar prices in New York recovered slightly in the last days since slumping to a 10-year low of 9.91 US cents on August 22 as a two-year global supply surplus and massive fund short position pressured values.

There was no immediate comment from the Indian trade ministry. Indian officials have earlier said the country's sugar exports do not violate WTO rules as New Delhi does not give any subsidy for overseas sales. India rather gives a production subsidy to its cane growers.

The Unica director said there are talks going on with Australian sugar industry representatives for a joint strategy at the WTO if the need arises.

There was no immediate answer from the Australian Sugar Milling Council to a request for comments.

"We know the market fell due to a coincidence of large productions in Europe, Thailand and India, but things are improving now, production is falling so we don't see the need for an export subsidy from India," Leao said.

Market estimates put the Indian sugar surplus at around 10 million tonnes. That sugar is priced above current market value to stimulate exports the government would need to help mills.

Unica's director said Indian mills will eventually be able to sell in the export market as prices continue to recover.

He said the Brazilian government is willing to back their plans. "They are sensitive to this due to the difficult financial situation of many mills."

Brazil decided on August 31 to open a consultation at the WTO regarding Chinese safeguards on sugar imports.