After the Indian government banned exports of certain types of rice on July 20 to control domestic prices, traders are concerned that another commodity could be vulnerable: Sugar.
The world is increasingly dependent on sugar exports from the South Asian nation as global supplies tighten. Uneven rainfall across India’s farm belts has raised concerns that sugar production will fall, potentially for a second straight year in the season that began in October, which could limit India’s ability to export.
Henrique Akamine, head of sugar and ethanol research at the São Paulo-based Tropical Research Service, said the rice export ban was a clear signal that the Indian government was concerned about food security and inflation. "The worry now is that the government might follow suit and do something similar with sugar," he said.
According to the Indian Sugar Mills Association, sugarcane fields in the key producing states of Maharashtra and Karnataka did not receive adequate rain in June, leading to concerns about crop output.
Uneven rainfall across India's farm belts has raised concerns that sugar production will fall. Illustrative photo
The association expects sugar production to decline 3.4% year-on-year to 31.7 million tonnes in 2023-24. This supply can meet domestic demand but at this level of output, India is unlikely to export sugar.
Meanwhile, India will use more sugar for biofuels. The Indian Sugar Mills Association sees mills diverting 4.5 million tonnes to produce ethanol, up 9.8% from the previous year.
“At this level of production, India is unlikely to export sugar. We will have to watch closely to see if the ethanol transition is complete,” said Bruno Lima, head of sugar and ethanol at StoneX.
In 2021-22, India exported a record 11.2 million tonnes of sugar to countries like Indonesia, Malaysia, Bangladesh, Sudan, Somalia and the United Arab Emirates.
The country was expected to produce around 38.5 million tonnes in 2022-23, but this estimate has been lowered to around 32 million tonnes by the Indian Sugar Mills Association.
Earlier this year, the International Sugar Organization (ISO) revised down its forecast for the world sugar surplus in the 2022/2023 crop year from 6.2 million tons in November 2022 to 4.2 million tons in February 2023. Accordingly, the world sugar inventory in the 2022/2023 crop year is expected to decrease by 13% compared to the previous crop year, creating pressure to keep sugar prices at high levels.
Minh Hoa (reported by VNA, Investment newspaper)
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