In a move aimed at supporting domestic sugar mills and stabilising local prices, India decided to permit exports during the ongoing season ending in September. The decision is likely to have an adverse effect on global prices of the commodity.
India’s government announced its decision on Monday to permit the export of 1 million metric tons of sugar during the current season.
Surplus stock
This strategic decision comes as India, the world’s second-largest sugar producer, grapples with a surplus of sugar stocks.
By facilitating the export of excess sugar, the government seeks to prevent a glut in the domestic market, which could lead to a sharp decline in sugar prices and adversely impact the livelihoods of sugarcane farmers.
This measure also allows Indian sugar mills to capitalize on international demand and earn valuable foreign exchange.
The export quota of 1 million tons represents a significant portion of India’s surplus sugar production, and its timely release is expected to provide much-needed relief to the domestic sugar industry.
The government’s decision is expected to ensure price stability and support 50 million sugarcane farmers in the country, India’s Food Minister Pralhad Joshi said on Monday.
Global prices fall
However, the recent decision has the potential to exacerbate the downward trajectory of global prices, which were already experiencing a decline.
This decline was evident on Monday, with global sugar prices falling by more than 1%.
The Food Ministry of India has implemented a uniform policy for exports.
Under this policy, sugar mills have been allocated a uniform export quota.
This quota is set at 3.174% of their average sugar production over the past three years.
Mills have the flexibility to either export this allocated quantity directly or engage the services of merchant exporters to facilitate the export process.
Unexpected decision
Despite widespread speculation and rumors circulating for weeks about the potential allowance of exports by India, the official decision still managed to catch some traders off guard.
This unexpected surprise was primarily attributed to the anticipated shortfall in this season’s production, which is projected to fall below consumption levels for the first time in eight years.
The combination of these factors – the unexpected decision and the looming production deficit – created a sense of uncertainty and surprise within the trading community.
Leading trade houses indicate that sugar production in India could drop to approximately 27 million tons from last year’s 32 million tons. This is below the annual consumption of over 29 million tons.
India had established itself as a major player in the global sugar market, consistently ranking as the world’s second-largest sugar exporter over the five years leading up to 2022-23.
The country’s sugar exports during this period averaged an impressive 6.8 million tons annually, reaching a diverse range of international markets.
India’s primary export destinations for sugar included Indonesia, Bangladesh, and the United Arab Emirates, among other countries.
This widespread export network highlights India’s significant contribution to meeting the global demand for sugar.
However, the country did not allow any exports during the 2023-24 marketing season as domestic sugar stocks fell sharply due to lower production.
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