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Global Sugar Prices May Go Up As Indian Output Drops

Published Date: May 25, 2023

India is the largest sugar producer and sugar exporter in the world. Bumper sugar production helps the Asian nation ship bulk sugar and satiate global demand of the sweetener. Thus, any impact on India’s sugar production would consequently raise troubles for the countries reliant on India for sugar imports and will fuel prices of the commodity and this is what seems to be the case this time around.

The Indian Sugar Mills Association (ISMA) estimated India’s sugar production to stand at 38.5 million tonnes in 2022-23; however, the association revised it estimates to 36.8 million tonnes on 26th of April, 2023. A drop in India’s sugar production could further fuel prices of the sweetener which is already ruling at their highest level in more than a decade and speculations of the same have already started circulating in the market.

Drop-In India’s Sugar Production

According to the Indian Sugar Mills Association (ISMA), India’s sugar production is set to fall this year, owing to weather-related disruptions and the same has been the rationale behind revising its production estimates, from 38.5 million tonnes earlier to 36.8 million tonnes.

Maharashtra, the key sugarcane-growing state of India, witnessed weather disruptions this year and this has hampered the domestic sugar production. Sugarcane crop requires evenly distributed and timely rainfall for its cultivation, and while the rainfall has been good collectively, its frequency and distribution bogged down the domestic sugar production.

India Unlikely To Allow Additional Sugar Exports

On 5th of November, 2022, the Government of India allowed sugar exports to the tune of 6.1 million tonnes on a quota basis for the first six months of the current sugar season and as it seems, a second tranche of sugar exports for the current cycle is highly unlikely.

Mr. Praful Jagjivandas Vithalani, Founder Chairman of the All India Sugar Trade Association said that at the earliest, we could expect a permission for sugar exports in the month of December after consideration of the primary production estimates have been made.

ISMA highlights that 5.7 million tonnes of the permitted quota has already been exported and the remaining can be expected to be shipped by 25th of May, 2023. As it stands, once the cap is reached, India will be able to export sugar only in 2024 and this is likely to aggravate the crisis and fuel prices of the sweetener in the global markets especially since production has declined in countries like China and Thailand.

The Bottom Line

India is the largest producer and exporter of sugar in the world and any effect on India’s sugar production is consequently going to get reflected in global sugar prices, raising troubles for countries dependent upon India for their domestic needs. As it seems, this is what going to be the case this time around. Owing to weather disruptions, India’s sugar production is set to fall this year and experts believe that this is going to further push global sugar prices which are already ruling at their highest level in more than a decade.

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