WORLD SUGAR PRICES CONTINUE TO RISE DUE TO REDUCED SUGAR PRODUCTION IN INDIA AND EXPORT RESTRICTIONS

Global sugar prices have risen near their highest levels in more than a decade, with a pound of raw sugar now trading at nearly 26 US cents, up from about 17 US cents in May 2013. The Indian government has restricted exports for the ongoing sugar production cycle, which runs from October to September every year, at 6.1 million tons.

WORLD SUGAR PRICES CONTINUE TO RISE DUE TO REDUCED SUGAR PRODUCTION IN INDIA AND EXPORT RESTRICTIONS

World sugar prices could soar due to reduced production in India - the largest producer of this commodity - and export restrictions imposed by the government.

Global sugar prices have risen near their highest levels in more than a decade, with a pound of raw sugar now trading at nearly 26 US cents, up from about 17 US cents in May 2013. The Indian government has restricted exports for the ongoing sugar production cycle, which runs from October to September every year, at 6.1 million tons.

Trade analysts say a second round of exports in the current cycle is unlikely. Praful Jagjivandas Vithalani, Founding Chairman of the Indian Sugar Trade Association, said that if any new export permits are issued, it will be December 2023 after taking into account preliminary production estimates for the new crop from October 2023 to September 2024.

According to the association, 5.7 million tons of the allowed quota have been exported, the rest is expected to be shipped out on May 25. The export restriction after reaching the cap means that Further Indian shipments will only be dispatched in 2024, with no major supplier in the global market at the time of production nor decreased in countries such as China and Thailand.

India exported a record 11.2 million tons of sugar in the 2021-2022 season, with shipments sent to countries such as Indonesia, Malaysia, Bangladesh, Sudan, Somalia and the United Arab Emirates. The country is expected to produce around 38.5 million tons in the 2022-2023 season, but this estimate was lowered to 36.8 million tons by the Sugar Mills Association of India (Isma) on 26/4. These figures include sugar converted to ethanol production, which shows that the actual production estimate of the sweetener is only 32.8 million tons compared with an annual domestic consumption of about 27.5 million tons.

The drop in yields was largely the result of weather-related disruptions in Maharashtra, a key sugarcane-growing state. Mr. Aditya Jhunjhunwala, President of Isma, said output has fallen by about 15% in the current production cycle.

As of April 15, India's sugar production stood at 31.1 million tons for the current crop year starting October 2022, down 5.4% year-on-year, with many mills closing closed early due to limited sugar cane resources. Sugarcane grown in India has a harvest cycle of 12 to 18 months. It is mainly planted from January to March and harvested from December to March of the following year. The crop requires timely and evenly distributed monsoon rainfall during June and July, followed by a dry period to ripen, but this traditional weather pattern has become erratic due to climate change.

Falling sugar production in India has raised concerns about rising prices during the summer months of April to June, when demand peaks due to increased consumption of cold drinks and ice cream. Cooling prices is a key priority for the government ahead of several state elections in 2023, as well as general elections scheduled for April and May 2024. In April, ex-factory sugar prices increased by 300 rupees to 3,590-3,750 rupees per quintal in Uttar Pradesh.

There has been speculation that the government may even limit pending exports to an allotted quota of 6.1 million tons. The Mint newspaper reported on May 8 about a new plan to limit shipments of about 85,000 tons that have not yet left Indian shores.

Industry analysts say such a move is unlikely given the limited numbers involved. The supply crunch in India comes as global sugar prices are rising, reaching their highest levels since 2011 in late April, when raw sugar was trading at 27 US cents/lb. Since then, prices have fallen slightly, but inflationary pressures persist.

In May, the FAO Sugar Price Index rose 17.6% from March, the highest level since October 2011, due to lower production expectations and results in India, China, Thailand and European Union due to dry weather conditions. The slowing cane harvest in Brazil, coupled with higher international crude oil prices, could increase demand for cane sugar made from ethanol, which is also cited as one of the factors.

Rahil Shaikh, CEO of Meir Commodities, a sugar trading company in Mumbai, predicts a global deficit of around 3 million tons in the 2023-2024 season due to shortfalls from suppliers such as India. and Thailand. The world market is currently scarce and too dependent on the upcoming output of Brazil. If there is a supply problem there, prices could go even higher.