The ongoing sugar production cycle, which lasts from October to September every year, has a 6.1 million tonnes export limit set by the Indian government. A second batch of exports for the current cycle is improbable, according to trade analysts.
Mr Praful Jagjivandas Vithalani, the All India Sugar Trade Association’s founder chairman, mentioned, “If any new permission for exports is granted, that will be in December 2023 after factoring in primary production estimates for the new season from October 2023 to September 2024.” The remainder is expected to be shipped out by May 25, with 5.7 million tonnes of the authorized quota already exported, according to the association.
Once the cap has been reached, further shipments from India will only be sent out by 2024 due to anticipated restrictions and the absence of the key sugar exporter in the global market would be at a time when countries such as China and Thailand have witnessed a decline in production. During the 2021–22 season, India exported a record 11.2 million tonnes of sugar, with shipments going to nations like Indonesia, Malaysia, Bangladesh, Sudan, Somalia, and the United Arab Emirates.
Global Sugar Prices Affected
India, the world's largest producer of sugar, has seen production fall recently, and the government imposed export restrictions, which could cause sugar prices to rise even more globally. A pound of raw sugar is currently trading at almost 26 US cents, up from roughly 17 US cents in May 2013. Global prices have already been rising toward their highest levels in more than ten years.
India’s Sugar Production
The Indian Sugar Mills Association (Isma) revised its projection for the country's production in 2022–2023 from 38.5 million tonnes to 36.8 million tonnes on April 26.
These figures take into account sugar that is diverted for the production of ethanol, showing that the estimated annual domestic production of the sweetener is only 32.8 million tonnes, compared to a consumption of about 27.5 million tonnes. In Maharashtra, a crucial state for sugar cane production, weather-related disruptions are largely to blame for the output decline.
Isma's president, Aditya Jhunjhunwala, claimed that production there has decreased by about 15% during the current production cycle. He also said, "the rainfall was good overall, but it came in bursts, and it was not evenly distributed."
For the current season, which started in October 2022, India produced 31.1 million tonnes of sugar as of April 15—a decrease of 5.4% year over year—with many mills closing early due to a shortage of sugar cane.
India has a 12- to 18-month cropping cycle for sugar cane. The majority of the planting takes place between January and March, and the harvest occurs between December and March the following year. The crop needs timely and evenly distributed monsoon rains in the months of June and July, followed by a dry period for ripening, but due to climate change, this usual weather pattern has become erratic.
The Indian government's top priority in the run-up to several state elections in 2023 and the general election scheduled for April and May 2024 is to bring down prices. Ex-mill sugar prices in Uttar Pradesh spiked in April by 300 rupees (S$4.80), to 3,590-3,750 rupees per quintal. The FAO Sugar Price Index increased 17.6% from March to May, reaching its highest level since October 2011, as a result of reduced production expectations and results due to dry weather in India, China, Thailand, and the European Union.
India is experiencing a supply shortage at a time when sugar prices worldwide are rising. At the end of April, when raw sugar was selling for 27 US cents per pound, they reached their highest level since 2011. Since then, they have slightly subsided, but inflationary pressures are still present.
One of the contributing factors was a sluggish start to Brazil's sugar cane harvesting, along with higher global crude oil prices, which may increase demand for ethanol made from sugar cane.
There have been rumors that the government may even limit exports that are still subject to the 6.1 million tonnes quota. On May 8, The Mint newspaper published a new plan to reduce shipments of roughly 85,000 tonnes that have not yet departed Indian soil. The government did not respond to a request for comment, but industry analysts said that given the small amount involved, such a move is unlikely.
Given the shortfall from suppliers like India and Thailand, Rahil Shaikh, managing director of Mumbai-based Meir Commodities, predicted a global deficit of about three million tonnes for the 2023–24 season. “I think the world market is tight at the moment, and it is overly dependent on Brazil’s forthcoming production. If there is a supply issue there, prices can go even higher.”
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