Time for Indian Sugar to Make a Move

Published 2020년 2월 11일

Sugar prices are at an all-time high due to worldwide deficits during the 2019/2020 season. Indian production estimates for 2020/2021 are optimistic and could potentially fill in for importers that have been dependent on Brazil and Thailand.

The International Sugar Organization has urged sugar importers to purchase sugar from India in order to lower global prices. According to ISO, the prices are currently at almost 15 cents per pound from 11-13 cents per pound six months ago. This is nearly the highest it’s been during the last 30 months and is still expected to rise by 3% until the end of 2020.

Indian Production for 2020/2021 Optimistic Despite Shortages in 2019/2020

The high prices are a direct result of the sugar deficit of the 2019/2020 season resulting from top producers such as Brazil finishing at 27 million tonnes with an all-time-low of 34% contracted to be processed into raw sugar, as the rest is to be utilized for ethanol productions. Thailand also finished at a 28% decline following a drought this past season, and India experienced a temporary decrease in production by 21% due to floods after five years of oversupply.

Despite worldwide deficits, India is expected to produce a high yield for the 2020/2021 season with a total estimated production volume of 30 million tonnes, up by 4 million tonnes from 2019/2020. Sufficient rainfall in the states of Maharashtra, Karnataka, and Tamilnadu, its key regions, has made this possible. Thus there is a great incentive for India to take advantage of the current situation and expand on its exports as well as domestic consumption.

Opportunity for India to Expand On The Global Market

MSM, Malaysia’s top sugar refining company has already contracted 50,000 tonnes from India in January and is expecting 130,000 tonnes of exports to the country this first quarter which is worth MYR 200 million (USD 49.2 million). This is a substantial increase from the same quarter in 2020 at 88,000 tonnes and is speculated to be a cordial gesture from the country after Malaysian palm oil imports to India stopped following Malaysian Prime Minister Mahathir Mohammad’s remarks criticizing India’s policy in Kashmir. MSM is a subsidiary company of FGV Holdings, the world’s largest palm oil producer based in Malaysia.

As prices are set to increase continuously, top producing countries such as Brazil are considering turning their ethanol-producing cane supply to raw sugar productions. However, experts believe it might be a while before Brazilian sugar mills are incentivized sufficiently to alter their productions. In addition, although it is still too early to tell if Thailand’s productions will recover for the 2020/2021 season, according to an executive of COFCO, China’s largest food processing company, full recovery is not expected to happen any time soon.

Thus, for the time being, India remains the key supplier for buyers to turn to. This could allow a new alternative for importers that are dependent on Brazilian productions such as Iran and Bangladesh, and countries reliant on Thai productions such as Indonesia, Myanmar and Cambodia, and the Philippines to turn over to India this coming season. Most of these countries are located in Southeast Asia, which also acts as a geographic advantage for Indian suppliers.