After wheat, rice, and onions, is sugar the next on India’s export ban list? What lies ahead for the commodity?
Food shortage is becoming a global concern. But, this did not happen overnight. There were early predictions that the weather has not been so favourable in most of the regions of the world, and hence, we may see some impacts in the near term.
Now, we are facing the impacts of these issues with food shortages all over the world. Do you remember when citizens stood in queues outside grocery stores in the US to get their hands on a bag of rice after India banned exports of some rice varieties? We covered that in one of our articles. And it’s not just rice – wheat and onions are also on the restricted list.
But now it is said that sugar is also on the radar of an export ban! Why? And what could be its impact?
Let’s find out.
What’s Happening?
According to a Reuters report, India is considering banning sugar mills from exporting sugar in the upcoming season, starting in October. This is a surprise move because they haven’t taken such a step in the past seven years.
If we look at the past, in 2016, India implemented a 20% tax on sugar exports to regulate the quantity of sugar leaving the country’s borders. In the current season till 30th September 2023, India has allowed mills to export a maximum of 6.1 million tonnes of sugar.
If we compare this to the last season, the exports stood almost double – 11.1 million tonnes of sugar.
And now there are expectations of a complete ban. But Why?
Why is There a Possibility of a Sugar Ban?
The driving force behind this potential ban is a significant drop in sugar production.
Let’s simplify the equation to understand better. You see, India has two major sugar production hubs – Maharashtra and Karnataka. Together, they account for over half of India’s total sugar output. But this year, there is been a hiccup in sugar production. According to a report by Mint, the figures show that sugar production is down by a whopping 50% below average.
Now we know that sugar comes from sugarcane, and growing sugarcane needs a lot of water. To put it precisely, according to the Food and Agriculture Organisation of the US, sugarcane needs somewhere between 1,500 and 2,500 mm of water evenly spread throughout its growing season.
But, India has received only about 90.7 mm of rainfall in the first 17 days of August. According to a Reuters report, this is almost 40% less than usual.
So, sugar production takes a hit when the rain is unpredictable and irregular.
But how much of a hit are we talking about?
According to the Indian Sugar Mills Association (ISMA), as reported by the Economic Times, India’s sugar production might drop by about 3.3% to hit 31.7 million tonnes in the 2023-2024 season.
Rising Inflation
Another important reason is the high food inflation in India. The combination of reduced production and strong global demand poses a potential threat to inflation rates. This is why the consideration for an export ban has come into play. Implementing such a ban would help maintain stable domestic supplies of sugar and serve as a preventive measure against any further escalation of prices.
The sugar prices recently spiked internationally due to mounting concerns about supply shortages. Take Thailand, for instance – it is the world’s third-largest sugar exporter, and it is currently grappling with a significant 31% drop in its sugar crop, as reported by CNBC TV18.
What’s Next?
From a global point of view, it is estimated that sugar consumption could hit roughly 176 million tonnes, surpassing the projected production of 174 million tonnes. According to a report from the United States Department of Agriculture (USDA), there is an expected 15% drop in the sugar stocks available in the global markets. This would take those stocks down to a 13-year low, and that is quite a significant dip.
When you put it all together, the current indicators suggest sugar as a commodity is in a promising position, as per a CNBC TV18 report.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: https://tejimandi.com/disclaimer
