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Indian sugar production decline and export restrictions could lead to soaring global prices

Indian sugar production decline and export restrictions could lead to soaring global prices
by Insider Desk
May 16, 2023

Sugar prices worldwide are at risk of further escalation due to a decline in India’s sugar production, coupled with export restrictions imposed by the government.

Global prices are near their highest level in over a decade, with a pound of raw sugar trading at nearly $26 cents, up from around $17 cents in May 2013.

The Indian government has set a cap on sugar exports for the ongoing production cycle, which runs from October to September each year, at 6.1 million tonnes.

The All India Sugar Trade Association’s founder chairman, Praful Jagjivandas Vithalani, stated that any new export permissions will likely be granted in December 2023, factoring in production estimates for the new season from October 2023 to September 2024.

Approximately 5.7 million tonnes of the allotted quota have already been exported, with the remainder expected to be shipped out by May 25.

The anticipated export restrictions imply that additional Indian shipments will only be possible in 2024. This shortage of a major supplier comes at a time when sugar production has also declined in countries like China and Thailand.

During the 2021-22 season, India recorded a record-breaking 11.2 million tonnes of sugar exports to countries such as Indonesia, Malaysia, Bangladesh, Sudan, Somalia, and the United Arab Emirates.

However, the Indian Sugar Mills Association (Isma) lowered the estimated production for 2022-23 from 38.5 million tonnes to 36.8 million tonnes, with actual production for the sweetener reaching only 32.8 million tonnes when considering sugar diverted for ethanol production.

The decline in output is primarily due to weather-related disruptions in Maharashtra, a crucial sugar cane-growing state, with production falling by approximately 15 %t in the current cycle.

Erratic weather patterns caused by climate change, including unevenly distributed rainfall and a lack of dry periods for ripening, have negatively impacted sugar cane growth.
Concerns are growing over rising prices during the summer months when demand for sugar spikes due to increased consumption of cold drinks and ice cream.

The government aims to curb price increases ahead of upcoming state elections in 2023 and the general election scheduled for April and May 2024.

While there has been speculation about further export restrictions, analysts believe it is unlikely, given the limited quantity involved.

The supply shortage in India coincides with a global upswing in sugar prices, with the FAO Sugar Price Index reaching its highest level since 2011 in April. The market may face a deficit of around three million tonnes for the 2023-24 season due to the shortfall from suppliers like India and Thailand.

The industry is closely monitoring Brazil’s forthcoming sugar cane harvest as it plays a significant role in global supply.

Tags: ExportIndiaSugar Export
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