Food inflation, dip in production forces India to reduce sugar export

With food inflation hitting the country hard, India won’t allow more sugar exports after as only 6.1 million tonnes of the sweetener were shipped abroad in the current season that began on Oct 1, 2022 against a record 11 million tonnes in the previous season.

It was food inflation that prompted curbs on exports as sugarcane also remained low, dampening speculation that the world’s biggest producer of the sweetener would permit a second tranche of overseas shipments. India is the world’s biggest sugar exporter after Brazil.

However, it isn’t just sugar as December 2022 marked the steepest fall in two years for India’s goods exports, with products worth $34.5 billion shipped out — 12.2 percent lower than a year ago. This was the second time in three months that shipments dropped year-on-year.

But the authorities had said they could take a view on a second tranche of sugar exports after getting a clearer idea about local production.

Mills have already contracted to export about 5.6 million tonnes, and producers, traders and industry officials were expecting the government to allow an extra 2-4 million tons of overseas shipments.

But expectations of a drop in sugar output have dampened prospects of any additional exports during the current 2022-23 season.

Lower sugar exports from India could raise global prices, and allow rivals Brazil and Thailand to increase their shipments.

“Sugarcane yields were far lower than last year. The production is not sufficient to permit additional exports,” said an official with direct knowledge of the matter. He did not wish to be named as he is not authorized to talk to the media.

“It is not possible to fulfil the industry’s demand of 3-4 million tons. We can’t allow even additional exports of 1 million tons,” said another official.

Global trading houses were initially expecting that India would allow 8 to 9 million tonnes of sugar in the current year ending on Sept 30, 2023.

But adverse weather surprised the industry. The country’s sugar production was initially projected to rise to a record 36.5 million tonnes, far above local demand of 27.5 million tonnes. But now the production estimate has been cut to 34.3 million tons.

“We are getting divergent views on production. We will get a far better idea about production in the next month or so,” Food Secretary Sanjeev Chopra told reporters on Thursday.

One industry official said there was a proposal to allocate an additional export quota of around 400,000 tons to sugar mills that are making ethanol directly from sugar cane juice.

But even that proposal is unlikely to be approved before end-February as the government would prefer to see actual production numbers before making a decision.

“The government may not be able to allow even small quantity if production numbers continue to be revised lower,” the industry official said.

India mainly exports sugar to Indonesia, Bangladesh, Malaysia, Sudan, Somalia and United Arab Emirates.

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