The prices of sugar have surged past 28 cents per pound in the international market to touch a 12-year high as the sweetner is seen in short supply due to a sharp decline in Indian exports and logistics problems in Brazil.
Sugar prices have been steadily increasing in the international market to multi-year highs and the 15-day average price estimated by the International Sugar Organisation has been above 26 cents in recent weeks.
India has extended export curbs on sugar as domestic prices had started firming up and the government is keen to keep prices in check, especially during the festive season when the demand shoots up.
India is the world’s second-biggest sugar producer and reduction in exports impacts the global market.
The country had allowed mills to export only 6.2 million tons of sugar during the 2022-2023 season which ended on September 30, after letting them sell a record 11.1 million tons in the preceding 2021-2022 season.
The country has seen the weakest monsoon since 2018 this year and sugarcane production is expected to decline in the current season which gives rise to inflationary expectations that tend to push up prices. Sugar prices in India increased 5-8 per cent year-on-year in the second quarter, according to trade estimates.
India’s sugar production is likely to fall 8 per cent to 33.7 million metric tons in the 2023-24 marketing year, according to the Indian Sugar Mills Association (ISMA).
The fact that some sugar is diverted to make ethanol has also got be factored in.
Sugar mills diverted 4.1 million tons of sugar for ethanol production in the last marketing year and a similar amount could be allocated this year as well.
This has raised fears in trade circles that the government may even stop exports of sugar in the current season to keep domestic prices in check.
The supply of sugar in the international market has also been hit as the world’s largest producer Brazil is facing logistics problems.
The country’s ports have emerged as a bottleneck.
The turnaround time for ships to load has shot up and stocks are piling up at the ports.
With the soya crop also coming in the problem has got worse as both the railway and port infrastructure are not adequate to handle the consignments.
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