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Informist, Tuesday, Jan. 21, 2025

 

By Afra Abubacker and Taniva Singha Roy

 

NEW DELHI/MUMBAI – Domestic and international sugar prices may have reacted strongly to the Indian government's decision on Monday to lift the ban on exports, but they are likely to stabilise soon, according to market participants. Global sugar prices are likely to correct upwards as New Delhi has only permitted 1 million tonnes of exports in the next eight months and domestic prices will ease as the market is well supplied with ample carryover stocks and running mills, they said.

 

Global sugar prices dipped to a three-year low on Europe's Intercontinental Exchange on Monday after the Indian government announced the lifting of the ban. The price has fallen further to $464.40 per tonne on Tuesday. Ex-mill prices of sugar in key markets in the country had soared on Monday.

 

"The international market was not expecting India to export. It has reacted, and international market prices have gone down," Deepak Ballani, director general of The Indian Sugar & Bio-energy Manufacturers Association told Informist. "But this 1 million tonnes is a very small quantity as per global supply chain. So I believe the market will get corrected," he said. 

 

The Indian government banned sugar exports in June 2022 amid concerns about lower production. India is the second-largest sugar producer, after Brazil. In 2021-22, India exported a record 11 million tonnes of sugar, worth INR 400 billion. 

 

"The sudden depression of international market prices is temporary. We still have an eight-month window to export. We will have enough opportunity to sell sugar in the international market," Ballani said. 

 

According to traders, Indian white sugar is competitive in global markets. "The whole quantity (1 million tonnes) will definitely go out of the country," an official from Indian Sugar Exim Corp. Ltd. said. India mainly exports white sugar to Sri Lanka and African countries, he said. 

 

Traders see producers adjacent to ports – Maharashtra, Gujarat, and Karnataka – opting to ship out sugar due to lower logistics costs. Meanwhile, producers in states like Uttar Pradesh will trade their export quota to these states in exchange for a higher domestic sales quota, Ballani said. 

 

Global sugar rates will not remain depressed for long, Vinod Jain, executive director at Deccan Sugar Mills, said. Prices in the Intercontinental Exchange Europe could touch $518.64 per tonne in February, Jain said. Though Thailand's sugar production is good, the sugar quality is not as good as that of Indian sugar, he said. Thailand's sugar production in 2024-25 is estimated to rise 18% to 10.35 million tonnes. Thailand is the third-largest sugar producer in the world. 

 

India's entry into the global sugar market has threatened losses for other exporting countries such as Australia. The Australian Sugar Milling Council said that the Indian government's announcement to export has raised alarms about potential market disruptions causing a decline in sugar prices globally, according to media reports.

 

DOMESTIC PRICES

Though domestic sugar prices have soared after the announcement of exports, traders say ample sugar stocks are likely to keep prices in check. On Monday, sugar prices rose 100 rupees and crossed INR 4,000 per 100 kg in north Indian markets. "Prices are getting out of control," said Naresh Gupta, a local trader from north India.

 

However, with sugar prices in the domestic markets already elevated, they may stabilise at the current levels as the crushing season is on. "We have to wait and watch if the market absorbs these rates," Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association, said.

 

Sugar prices have been moving up in January as concerns about lower sugar production started to grip the market. According to ISMA, sugar output in Oct-Dec declined 15.6% on year to 9.54 million tonnes. However, the sugarcane crushing season is ongoing and will last till June. The market is awaiting sugar production estimates by leading trade bodies later this month, traders said. 

 

According to ISMA's first advance estimates, sugar output in 2024-25 is likely to be 29.3 million tonnes, down from 32.0 million tonnes a year ago. India consumes about 28-29 million tonnes of sugar annually. "We have a healthy sugar balance. We opened with a very good stock of 80 lakh (8 million) tonnes and reasonably okay production (in 2024-25)," Ballani said.

 

"Our ethanol program is almost maxed out at 40 lakh (4 million) tonnes. So we have everything ready and even if we export 10 lakh (1 million) tonnes, it will not have any impact (on domestic prices)," he added. 

 

However, some expect sugar prices to firm up amid upcoming Ramadan and summer demand. Moreover, mills now have an export market to offload their stocks. There is no selling pressure on mills to sell in domestic markets. Prices are likely to be on the positive side in the coming days, said Semal Sudhir Jain, secretary of the Kolhapur Karad Sangli Sugar Merchants Association. End

 

Edited by Saji George Titus

 

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