A Sweet Story of Exports: How India's Sugar Shipments Reached An Inflection Point

El Nino weather pattern could reduce rainfall and dent Sugar production further

Government can halt Sugar export for the first time in 7 years - Report

Image source Statistia.com

Sugar has been the topic of discussion in the market lately amid speculations about India, the second largest sugar exporter in the world, potentially imposing a ban on exports in the upcoming season starting October.

The Indian Sugar Mills Association (ISMA) refuted Reuters report that cited the Government may ban sugar export for the first time in seven years as premature assumptions.

Still, the possibility of curbing sugar export evolves on falling sugar cane yields due to inadequate rainfall as El Nino comes to affect. The El Nino weather pattern, which triggered most droughts that India faced during the past seven decades, could bring about extreme weather. Patchy rains would cut sugar output in the 2023-24 season and may reduce planting for the 2024-25 season.

The Reserve Bank of India too have cited El Nino impact on agriculture and crops and how it could keep food prices inflated in the coming months.

Retail inflation in India has spiked to a 15-month high of 7.44% in July and food inflation to 11.5% - its highest in over three years. Following that, local sugar price has also jumped to 2-year high in August at about Rs 50 per kg.

Between 2017-18 and 2021-22, sugar export has soared from $810.9 million to $4.6 billion, and could cross $5.5 billion - or Rs 45,000 crore - in the fiscal year ending March 31.

India allowed mills to export only 6.1 million tonnes of sugar during the current season to Sept. 30, after letting them sell a record 11.1 million tonnes last season.

The supply constrains may lead to a ban in sugar exports in future.

In July, India banned the export of non-basmati white rice, emphasising that it needed to prioritise domestic consumers. And earlier last week, the Government imposed a 40% export duty on onions to check the export of the red bulb and control its prices in domestic markets.

So, the most important question that emerges is will any future ban increase benchmark prices in New York and London that are already trading around multi-year highs, triggering fears of further inflation on global food markets?