Shares of sugar companies took a sharp knock after a Bloomberg news flash said the government was looking to limit exports of sugar. This was close on the heels of India slapping a ban on shipping wheat offshore.
The new move to curb sugar export is being seen by some as a new risk to global food prices. Bloomberg had earlier reported that the government may cap sugar exports at 10 million tonnes (MT) for the year ending September. A Reuters report too quoted government sources saying that India plans to potentially cap this season’s sugar exports to 10 MT.
This would be the first such restriction in six years. The source added that the step comes so as to prevent a surge in domestic sugar prices.
Reactions pour inFrom the global market perspective, India is the world’s largest sugar producer and second largest exporter after Brazil. Market participants are were quick to spot the development, and some reactions have started to come in.
Sugar export restrictions are actually not very restrictive
10 Million tonnes limit is quite substantial. Actual exports in any case would have been lower than this.— sandip sabharwal (@sandipsabharwal) May 24, 2022
The India Sugar Traders Association reacted to the potential export limit and has termed it as a “precautionary step”, sources told CNBC-TV18. Further, CNBC-TV18 reports noted that India has agreements to export 8 MT of sugar, against an estimated 9.5 MT production in the 2021-22 season.
Analysts say that the 10 MT volume is a “fairly large cap” and that this will “help mills to export maximum amount and keep bare minimum in the country”. Sugar production in the country last year was 35.5 MT.
Sugar exports rose by 64 percent to 71 lakh tonnes during the October 2021-April 2022 period on better demand for the Indian sweetener in global markets, according to a statement by the industry body Indian Sugar Mills Association (ISMA) on May 19. It added that 43.19 lakh tonnes of sugar were exported during the corresponding period of the last year.
Another 8-10 lakh tonnes of sugar is in pipeline to be physically exported in May 2022. ISMA said it expects over 90 lakh tonnes of export in the current 2021-22 marketing year, as against 71.91 lakh tonnes exported in the previous year.
Sugar production rose by 14 percent to 348.83 lakh tonnes till May 15 of the current marketing year that started in October 2021, on higher sugarcane production, according to ISMA. Sugar production stood at 304.77 lakh tonnes in the year-ago period. The sugar marketing year runs from October to September.
The food ministry also reported that India exported 75 lakh tonnes of sugar till May 18 in the current marketing year ending September. "Export of sugar in the current sugar season 2021-22 is 15 times the export as compared to export in sugar season 2017-18," the statement from the ministry read.
The major importing countries are Indonesia, Afghanistan, Bangladesh, Malaysia, Sri Lanka, the UAE and African countries.
The average retail price of sugar in is about Rs 41.50 per kg in India and is likely to remain in the range of Rs 40-43 per kg in the coming months.(With inputs from Bloomberg, PTI and Reuters)