India, the world’s second-biggest sugar producer, grab this opportunity and speed up the sugar export. So, India has set a target of exporting 6 million tonne sugar for the year 2020-21 and the sugar mills have so far signed contracts to export 1-1.5 million tonnes of sugar after the government declared export subsidies of Rs 35 billion to international market. Furthermore, the exports will help the world’s second-biggest sugar producer to bring down stockpiles and support local prices, which, at odds with the global market, have been falling due to oversupply at home.
Mills have so far agreed contracts to export 1.5 million tonnes of sugar in the 2020/21 marketing year that started on Oct. 1, mainly to Indonesia, Sri Lanka, Afghanistan and African countries for shipments in January to March, the officials said. Contracts were signed between $375 and $395 a tonne on a free-on-board (FOB) basis, three dealers directly involved in the deals said. They did not wish to be identified in line with their organisations’ policies.
“Most of the contracts were done for raw sugar, which is heading to Indonesia,” said Rahil Shaikh, managing director of MEIR Commodities India. Indonesia, which traditionally imports the bulk of its requirement from Thailand, started buying Indian sugar in 2020 after changing purity regulations for sugar imports.
Out of the 1.5 million tonnes of export contracts signed, nearly 1 million tonnes was for raw sugar, while the rest was for white sugar, dealers said. Sri Lanka, Afghanistan and African countries are buying small amounts of white sugar, but demand is limited for whites due to a shortage of containers.
The Indian Sugar Mills Association, the national industry association for producers, estimates output at 31 million tonnes in the 2020-21 marketing year ending Sept, against annual demand of around 26 million tonnes. The June-September monsoon rainfall in 2020 was above average for the second year in a row – the first time that has happened in decades, replenishing reservoirs and ground water supplies.
Higher output would add to India’s swelling stockpiles and could force New Delhi to again subsidize exports to tackle the surplus. The subsidized exports from the world’s second largest producer could weigh on global prices SBc1 LSUc1. “It’s tough to give an estimate now for next season’s sugar output, but it would be higher than this year’s,” said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories.
“Sugarcane gives us better returns than other crops, but we often could not plant it due to water scarcity,” said Shrikant Ingale, a farmer in the western state of Maharashtra, who has planted sugarcane for the first time in three years on his four acres of land.
Maharashtra, along with the states of Karnataka and Uttar Pradesh, account for nearly 80% of India’s sugar output. Farmers in Maharashtra, which typically accounts for a third of India’s sugar output, have planted sugarcane on 449,911 hectares as of January, up nearly 40% from a year ago, government data shows.
Exports are a must to avoid a crash in local prices. And exports are not possible without a subsidy. The surplus production in the next season could force India to continue providing a subsidy for sugar exports, said a Mumbai-based dealer with a global trading firm.