The Indian authorities want to impose a ban on the supply of sugar to other countries. The reason is the decline in production and the fight against inflation in the run-up to local elections this year. India is the second largest exporter of sugar after Brazil. A final decision has not yet been made, but enterprises have already been advised to immediately stop exporting the product. Izvestia found out how this could affect world prices and whether the ban would affect Russia.
Reduce inflation
The fact that the Indian authorities intend to impose a ban on the supply of sugar to other states was reported by the local TV channel Wion, citing a source in the government of the country. This decision, according to the source, is dictated by a decrease in sugar production and the need to prevent the risks of inflation before the elections in the states of India and in the lower house of parliament in 2023 and 2024.
The final decision has not yet been made, but, according to the source, the sugar mills were recommended to voluntarily stop deliveries abroad. At the same time, suppliers have already shipped most of the products in accordance with the fixed quota set for the year. Now about 200 thousand tons of sugar will not get abroad.
— Decline in production estimates by key players in the sugar market has led to an increase in world sugar prices by about one-fifth since the beginning of the year. The fall in oil prices, stimulating production, did not outweigh the adverse weather conditions that forced the Indian authorities to restrict export deliveries in order to ensure the sufficiency of the product in the domestic market,” notes Sergey Gataullin, Dean of the Faculty of Digital Economy and Mass Communications at MTUCI.
Prices have increased
The expected domestic consumer demand for sugar in India is estimated at 27.5 million tons – to satisfy it, the reserves of the strategic product should be quite enough. However, for countries dependent on Indian supplies, the decision to ban exports in general can be called unfavorable. Futures for the product on global markets have already risen to an 11-year high due to supply shortages. The thing is that India is the world’s largest producer of sugar and its second largest exporter after Brazil.
— A similar situation developed last year, when, against the background of the expected reduction in export supplies of sugar from India, a fairly significant increase in prices was observed on the world market. First of all, the largest importers of Indian sugar suffer from this: Bangladesh, Indonesia, the United Arab Emirates, China and many others, recalls Sergey Gebel, CEO of the law firm Gebel and Partners.
According to Stanislav Bovt, financial analyst at CMS Group, the potential for growth in sugar prices in the world remains and could reach 13-15% of today’s prices.
Compensate volumes
However, shocks should not be expected. Rising world prices will spur an increase in supplies from competitors, which will compensate for Indian volumes falling out of the market. So, in Brazil this year they plan to collect the second largest sugar harvest in the history of observations. According to Conab, the world’s largest exporter plans to increase sugar production by 4.7% this season yoy.
“This could come as a relief to global markets, where futures rose to an 11-year high due to a supply shortage. A record harvest in Brazil will help ease pressure on global markets from smaller harvests in other countries such as India and Thailand. Namely, these three countries account for more than 60% of the world sugar market,” points out Arthur Meinhard, head of the analytical department for global markets at Fontvielle Investment Company.
Russia is enough
The Russians have nothing to worry about in this situation. Russia is fully provided with domestically produced sugar. And taking into account all the sanctions and restrictions, the volume of output over the past year has only increased.
– The sugar beet industry has hundreds of independent producers, and production, according to IKAR, will amount to 6.35 million tons, which is 11.8% higher than the previous season. 65 sugar factories in 18 regions of the country should keep the market stable in the country in 2023, Stanislav Bovt points out. According to his estimates, the price of sugar in the country will increase slightly – in the range of 10-12%, based solely on the global situation.
How informed in April, the Union of Sugar Producers of Russia (“Soyuzrossakhar”), the domestic market of Russia in 2023 will be adequately supplied with sugar. According to the analytical service of Soyuzrossahar, since the beginning of 2023, 490 thousand tons of white sugar have been produced in Russia, which is 200 thousand tons more than in the same period last year.
Currently, three sugar factories in Russia continue to produce sugar from sugar syrup and molasses, and in total, more than 130 thousand tons will be produced by the end of the current season. In total, in the 2022/23 season (August-July), sugar production is expected to be .1 million tons, which is 300 thousand tons more than in the 2021/22 season.
The export of Russian sugar remains at the level of average monthly two-year values. According to Soyuzrossahar, since the beginning of 2023 Russia has exported more than 90 thousand tons of this product.
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