India is well known for being the world’s second biggest sugar exporter. And at the start of every new marketing year, i.e., the 1st of October, India decides a particular number of sweetener mills that can export a specific volume of sugar. Supposing there are delays in shipments from India, that could help global sugar prices rise and trade for other sugar exporting countries.
India is deciding to stop the sugar export until at least the first half of the next season in 2024 because the government is concerned that the El Nino weather pattern might reduce a huge amount of rainfall and dent production, as said in reports by them on Monday. But looking at this, the Union government might take huge steps and put a ban on sugar exports as the production is declining, which creates a fear of a price hike due to a shortage.
In the year 2022-23, the marketing year of sugar exports, i.e., October-September, the union government constricted the sugar exports up to 6 million tonnes and till that point, the contracts for exports of 6.1 million tonnes have been confirmed. The new foundation of current planned development involves the restricted shipments of about 85,000 tonnes that still have not left India.
A government official who is very aware of the current development said, “About 6.02 million tonnes of sugar has already been dispatched, and the government may restrict sugar mills from exporting the remaining quantity of 80,000-85,000 tonnes.” He also added, “Though prices of the sweetener have stabilised, the government is being vigilant amid a drop in production.”
The current El Nino weather pattern has provoked a large number of droughts in India during the last seven decades, which could bring about the worst weather this year. A senior government official who did not want to be recognised in line with official rules said, “The weather is a big negative factor. Last year, despite good monsoon rains, sugar production fell. This year, with El Nino, we cannot take the risk of granting allowance of exports early.”
Another government official, who also declined to be identified said, “In any sugar season, it takes at least a few months to get a clear idea about production, and that’s why we will wait until there is an absolutely clear picture about production.” He added that, “As far as exports are concerned, we will not be in any hurry at all.” The spokesperson from the government did not respond immediately to the comment.
From the very start of the current sugar season to September 30, 2023, the industry closed the output at 36 million tonnes this year, which has been reduced to 32,8 million tonnes. Due to this lower output, India granted a permit to export 6.1 million tonnes for this season. Also because of this, the quota has been exhausted, which has caused India to stop exporting sugar this year.
The country exported more than 11 million tonnes in the year 2021-22, which is the highest to date. The officials said, “Even if India agrees to allow exports later during the 2023-2024 season, New Delhi may not allow more than 4 million tonnes.” The government is keen to control food prices ahead of some state elections in 2023 and a general election in mid-2024.
A Mumbai-based dealer with a global trade house said, “The delay in Indian exports will further lift prices and will allow Brazilian sellers to demand even higher prices.” They added by saying, “The world needs more Indian sugar as soon as possible since global prices are trading near an 11-year high.” This will probably make Brazil the world’s largest producer and second-largest exporter of sugar by replacing India. But India has to come back on track and not let Brazil take its place when it comes to being a producer.