Title: Another agricultural product is ready for a price increase! Traders warn India may curb sugar supplies
Source: Financial Associated Press
Author: Malan
India’s recent ban on rice exports has sparked concerns among traders that another major export product, sugar, could also face restrictions. The ban on rice is seen as a clear signal from the Indian government about its concerns regarding food security and inflation, which will likely extend to the sugar industry.
India has been facing poor rainfall in its agricultural belt, resulting in damage to crops like rice and sugar cane. This has raised concerns about a decline in sugar production for the second consecutive year, putting pressure on India’s exports. The global market heavily relies on India’s agricultural products, particularly due to tight supply caused by bad weather and conflicts between Russia and Ukraine. Any restrictions on sugar exports from India would worsen the global food crisis.
Aditya Jhunjhunwala, Chairman of the Indian Sugar Mills Association, highlighted that the lack of rainfall in key sugar-producing areas has impacted the growth and harvest of sugarcane. It is projected that sugar production in 2023/24 will decrease by 3.4% year-on-year to 31.7 million tons. However, Jhunjhunwala expressed confidence that the output would be sufficient to meet India’s domestic demand.
Unfortunately, India is simultaneously diverting more sugar towards biofuels. The Sugar Mills Association anticipates an increase in sugar usage for ethanol production by 9.8% compared to the previous year. With the current production levels, it is speculated that India may not release any export quotas.
India had also imposed restrictions on sugar exports last year, limiting shipments to 6.1 million tonnes in 2022/23 from 11 million tonnes in 2021/22. Analysts predict that in the upcoming 2023/24 season, India may allow only 2-3 million tonnes of exports or even halt sugar exports entirely, causing a surge in global sugar prices.
Sugar futures have already risen by approximately 20% since the beginning of this year. Concerns are growing that the El Niño phenomenon could further impact agriculture in South and Southeast Asia, leading to a significant reduction in sugar shipments. Additionally, sugar production has been reported to be lower in regions such as southern Africa and Central America.
Bruno Lima, Director of Sugar and Ethanol at StoneX, expects sugar prices to fluctuate between 25 cents and $27.50 per pound in the next season. Currently, India has not clarified its production and trade policies for sugar. Harvesting is set to begin in October, and analysts believe that Indian officials will wait until they have a comprehensive understanding of the situation before taking any action.
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