Indian Government Expected to Ban Sugar Exports in MY 2023/24 to Secure Domestic Supply and Stabilise Prices
The 2022/23 sugar season in India has been marred by low production and elevated sugar prices. The Indian Sugar Mills Association (ISMA) lowered its Indian sugar production forecast for MY 2022/23 (October - September) to 32.8 million mt in April, down 8.4% YoY from 35.8 million mt in MY 2021/22 due to low crushing in Maharashtra, a leading sugar producing state in India. These low production figures supported prices during the early part of the season, with sugar prices rising as high as USD 0.5 per kg in Oct-22. Prices registered a 20.5% MoM increase and 8.2% more than the previous year, according to Tridge’s price data. This bullish trend prompted the Indian government to place an export cap of 6.1 million mt for the season to secure domestic supply and curtail inflationary pressures. As a result, sugar prices in India have been stable over the past two months, trading within a narrow range.
This price stability and ample domestic supply are expected to result in even tighter legislation in the coming year. According to the Indian government, the Indian Department of Food and Public Distribution is unlikely to allow sugar mills to export sugar in MY 2023/24 (October-September) to ensure domestic supply and continue to keep prices in check. Such a move could have ramifications on not just the Indian market but the global market, as India remains the second largest sugar supplier, behind only Brazil.
On the one hand, the Indian government could err on the side of caution by restricting exports, as domestic consumption remains high and the extent of El Nino's impact on next season's crop remains unclear. An export ban would also place downward pressure on local prices, increasing the affordability of this Indian staple within local markets.
However, such legislation could alter the global outlook for MY 2023/24. Firstly, in May, the USDA forecasted that global exports would increase by 6 million tons to 72.1 million tons in the coming marketing year due to expected production growth in Brazil, India, and Thailand. However, an export ban on Indian sugar exports could reverse this outlook, as they are expected to contribute 7 million tons to the global total. With Indian sugar exports out of the picture, the forecasted global figure would drop to 65.1 million tons, about 1 million tons lower than the current season. Secondly, sugar prices may be further supported by the absence of Indian sugar in global markets, worsening the inflationary pressures plaguing the current season (Read more here).
Source: Tridge, USDA
Any legislation regarding sugar exports for next season would be expected in September, when the Indian government is set to release its initial estimates for MY 2023/24, giving legislators a clearer sugar production picture for the coming season. The government is also improving its crop assessment process as sugar production for MY 2021/22 was higher than estimated by the sugarcane commissioner, and this season's output was significantly lower than estimated.
For further reading, following the links below:
1. “Sugarflation” Continues as Tight Global Supplies Push Prices Up to Record Levels
