Dubai's Al Khaleej sugar refinery, one of the world's largest, has bought the first cargoes of raw sugar from India in two years, rather than from its traditional supplier Brazil.

Trade sources said Indian mills had incentives to offer sugar for export from stocks due to low domestic prices, which are below the world price.

The Indian deal was for 100,000 tonnes of raw sugar for December to February shipment, $20 per tonne cheaper than Brazilian supplies, a senior Al Khaleej company official said.

Raw sugar futures on ICE were trading around 6 percent below a one-year high touched last Friday after a fire ravaged Brazilian supplier Copersucar's port terminal in Santos.

Copersucar is a traditional supplier of Al Khaleej.

The deal was unrelated to the fire at the Copersucar terminal, trade sources said, adding that at least 50,000 tonnes was agreed before the incident.

"The Dubai refinery previously took Indian sugar two years ago," one sugar trade source said. "What we are seeing now is a similar move by them to purchase raws."

Dealers said that following the fire, Al Khaleej would need to guarantee further supplies, with the possibility that they could be shipped via other port terminals in Brazil.

Trade sources said that rainfall had complicated the start of the Indian sugar harvest, compounded by disputes between farmers and millers over the cane price.

"It really depends on how much India can produce. The crop is behind at the moment. It is clearly the easiest origin for Dubai to go for in terms also of refining," another trade source said.

India, the world's second-biggest producer of sugar and a swing exporter that can impact global prices, will export 2.59 million tonnes of its excess sugar production in 2013/14, a state official said this week.

Trade sources said last week Indian dealers have struck deals to export about 175,000 tonnes of raw sugar for December-January delivery, marking their first sales of the sweetener in the new season beginning October.

"Towards the end of the Indian season I would be expecting maybe April, May, June, I think they will have some low-qualities for export, and depending on the demand of those low-qualities, some of those low-qualities could go to refineries such as Al-Khaleej, displacing the Brazilian raws," another trade source said.

Trade sources said shipping time is four days from India to Dubai compared with around 30 days from Brazil.

"The refinery will be looking to buy as much as they can if they are getting a discount of $20 to $25 on Indian raws. It is a sound trading play," the first trade source said.-Reuters