Low Sugar Production in MY 2022-23 Results in an Export Cap for Indian Sugar

According to the Indian Sugar Mills Association (ISMA), domestic sugar output is expected to drop to 34 million mt in MY 2022-23, a 5% YoY decrease due to an uptick in the diversion of sugarcane juice to the production of ethanol. ISMA forecasts that 4.5 million mt of sugarcane juice could be redirected to ethanol production this year. This strategy is part of the Indian government’s plans to raise India's ethanol production capacity by 25% to 12.5 billion litres by the end of 2023.

Source: Tridge, ISMA

Due to the anticipated reduction in production, the Indian government has recently placed a cap of 6.1 million mt on sugar exports for the current sugar season (Oct 2022-Sept 2023). The lowered export volume would be 44.5% less than the record 11 million mt exported by the South Asian country in the previous season. To date, Indian sugar mills have sealed contracts to export more than 5.6 million mt.

International trading houses initially expected India to permit up to 9 million mt of sugar in the current marketing year. However, adverse weather conditions in recent months further dampened these projections. Excessive downpours and cloudy weather between September and October 2022 curtailed sugarcane growth. The country's sugar crop was initially forecast to rise to a record 36.5 million mt, significantly above domestic demand of 27.5 million mt. But now ISMA's production estimate has been lowered to 34.3 million mt, while the All India Sugar Traders Association (AISTA) expects India's 2022-23 sugar production to fall by only 3.63% to 34.5 million tonnes. However, Tridge forecasts that Indian sugar production could drop by between 4% and 8%. Maharashtra, which contributes over 30% of the country's sugar output, is expected to produce 12.5 million mt, down 9.4% from an earlier forecast of 13.8 million tonnes.

The sugar export cap is set to impact India's major markets, Indonesia, Malaysia, Sudan, Bangladesh, Somalia, and the UAE. This would allow rivals Thailand and Brazil to increase their shipments, thereby taking advantage of India's export deficit. Brazil, in particular, is expecting sugar production to rise to 36.3 million mt this year, the second-highest output on record, allowing the South American country to surpass India as the leading sugar producer in the world. Thailand is also expecting a good harvest, with sugar production reaching 6.59 million mt by February 8, 10% more than the previous year, with sugar content in the cane crop at a record high. As a result, the Thai Sugar Mills Corp expects Thailand's sugar exports in MY 2022-23 to increase by 17% to 9.05 million mt.

The Indian government is expected to decide on raising the sugar export quota in March after assessing the current export estimate. The expectation is that, whichever decision taken by India, a top sugar producer and exporter, will have some underlying effects on the sugar market.