Sugar Exports

It could be the next big frontier for Indian sugar industry

As another sugar season comes to end, the question is not about production of sugar or about consumption. The big story is that India could end up with sugar exports of 5.50 million tons this sugar season; which extends from the month of October to September. This is the highest level of sugar exports that India has managed in the last 12 years.

But output was under strain?

While the state of Maharashtra managed to improve its sugar output this year by over 40%, sugar output in UP has been flat. Overall, India is likely to end the current season with total sugar output of 27.2 MT, which is much lower than the average output in the last 2 years. That was more due to a fall in sugar acreage in the state of UP and among the other smaller sugar producer states in India due to COVID pressures.

Demand has been constrained

It is estimated that sugar demand this year could be close to about 26 MT which is lower than the previous years. That is more because industrial demand, which constitutes 60% of sugar demand was lower by 15% this year. Household demand was down by just 3%. The industrial demand for sugar took a hit as restaurants, malls and cafes continue to remain shut. Production disruptions at FMCG companies, cola bottlers and confectioners also took a toll on sugar demand, keeping it under pressure.

How exports came in the picture

If you thought that demand and supply were balanced, the problem is closing stock. Due to a surfeit of sugar output in the last 2 years, India has a closing inventory of nearly 14MT. That is where the 5.50MT of sugar exports come in handy. It will reduce the domestic sugar glut and help keep prices at competitive levels for sugar producers. Last year, the government had also announced subsidies for Indian sugar companies to encourage exports. That may have raised the hackles at WTO, but it’s more of a business decision. India must look to make the best of this opportunity.

Help from Brazil and Thailand

Two out of the three largest producers of sugar in the world are having trouble. Sugar output in Brazil has been hit badly by the pandemic and dispatches from Brazil are getting delayed by nearly 45- 60 days. That is opening up a window of opportunity for India. Thailand has seen its sugar output badly hit by the drought which reduced its sugar output by more than 10% this year. Some traditional Thai customer nations like Indonesia, Iran, Vietnam, Kenya and Bangladesh have already placed sugar import orders with India. But the bigger challenge for India is to find alternate applications for sugarcane like Brazil diverts nearly half of sugarcane output to fuel mixing. That could be more productive in the long run and also environment friendly!

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