India’s domestic demand and Brazil’s recovery could gain after sugar export ban

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Days after the ban on wheat export to control rising inflation and amid growing international pressure to reverse the ban, comes another cap, this time on sugar exports with the government May 24 deciding 10 MT of exports with special authorization between June 1 to October 31, 2022.

Limiting sugar exports during the current 2021-22 sugar season from June 1, 2022 is, according to Food Secretary Sudhanshu Pandey, “a precautionary measure to ensure sufficient supply during the festive season in October November”.

The government’s argument is that with the global availability of sugar restricted due to the shortage in Brazil, it wants to ensure that the ending stock of sugar at the end of the sugar season (September 30, 2022) remains about 6-6.2 million tons – just the optimum level to meet national needs in October-November.

The decision to regulate sugar exports will help maintain domestic availability and price stability of sugar in the country during the 2021-22 sugar season (October-September), Pandey said.

On the other hand, with rising world sugar prices due to concerns over Brazil’s low sugar production, Indian sugar exporters have seen better prospects which may lose some luster with this export restriction. The export crunch, ironically, comes amid India’s emergence as the world’s top exporter and producer of sugar, toppling Brazil which has faced a production shortage this year.

Sugar production at 35.5 MT is the highest in the world this year, after discounting the diversion of 3.5 million tonnes for ethanol. Availability exceeds national requirements of 27.8 million tonnes. Over the past few years, the government has been diverting excess sugar into ethanol and through export, which has led to increased overseas sugar shipments and made India the world’s second largest exporter. of this product.

In the 2017-18 sugar seasons India exported 0.62 MT, in 2018-19 the export was 3.8 MT and in 2019-20 the country shipped 15.96 MT of sugar. Sugar exports stood at a record 7 MT in the 2020-21 marketing year, beating the target of 6 MT. At 10 MT in this current 2021-22 marketing year, exports of the sweetener are the highest on record, according to Pandey, with exports of around 9 MT already and of which 7.5 MT have been exported. .

With no official word on the exact duration of the sugar export ban, there are concerns in the future of a slowdown in India’s sugar exports, which have grown by leaps and bounds. giant backed by government policies that have helped farmers increase their income by tapping into global markets and India. sugar exports to 121 countries around the world.

According to data from the Directorate General of Trade Intelligence and Statistics, India exported sugar worth $1,965 million in 2019-2020 which increased to $2,790 million in 2020-21 and $4,600 million in 2021-22. In 2021-22 (April-February), India exported $769 million worth of sugar to Indonesia, followed by Bangladesh ($561 million), Sudan ($530 million) and the United Arab Emirates ($270 million).

India has also exported sugar to Somalia, Saudi Arabia, Malaysia, Sri Lanka, Afghanistan, Iraq, Pakistan, Nepal, China, USA, Singapore, Oman, Qatar, Turkey, Iran, Syria, Canada, Australia, South Africa, Germany, France, New Zealand, Denmark, Israel, Russia and Egypt. With restrictions on sugar exports, India could lose the advantage it has gained and the opportunity to exploit its export potential and markets.

Raj Vyas, portfolio manager of Teji Mandi, a SEBI-registered investment advisory firm, believes this is a good step on the part of the government that will protect the country’s own food supplies. “As in all cases, exports were not expected to occur above 10 MT and the fact that the government is comfortable even at a stock level of 6 MT by the end of September 2022 is positive,” says Vyas, ruling out any impact on profits as these are only the potential export restrictions and there is no export ban.

India has other concerns. The “timely” measure, according to the Food Secretary, will prevent any undue spike in retail prices amid a global shortage of the commodity. Currently, wholesale and retail sugar prices are more stable compared to other commodities and over the past 12 months sugar prices have been under control. These measures should be seen in the context of efforts to control inflation.

Consumer prices in April jumped to an eight-year high of 7.79%, well above the Reserve Bank’s 6% tolerance limit for four straight months. With an assured supply of sugar to meet demand from October to November, the government would not only have tamed a speculative price increase, but would also have responded to an anticipated increase in domestic demand.

India’s sugar consumption in the 2021/22 marketing year ending September 30 is expected to increase nearly 3% from a year ago to a record high of 27.2 MT, according to the Indian Sugar Mills Association, as heavy consumers in the beverage and FMCG segments are demanding increased inventory this summer after COVID-19 related restrictions are lifted.

Sugar export restrictions came for the first time in six years after India restricted the export of the sweetener by imposing a 20% export duty in 2016. A halt in exports is likely to have a significant impact on the global sugar market given that India is a major producer and exporter and is pushing prices up amid rising global commodity prices, but there is reason for hope .

Brazil’s sugar cane production, according to industry and market sources, could increase by 6.7% to 558 MT in the 2022-23 season due to better field recovery after the drought last year. As a result, sugar production is expected to increase to 33.5 MT from 32.1 million tonnes for the 2021-22 season. Also, ethanol production should reach 30.2 billion liters against 27.5 billion liters the previous season.

Read also : Why Bihar is bullish on ethanol and how this alternative fuel fits into India’s energy puzzle

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