Everyone knows how much we Indians love sweets, so sugar, which is consumed in everything from mithai and chocolate to fizzy drinks and baked goods, is becoming ever more expensive, raising costs for the industry and keeping up the pressure on global food inflation.
Refined sugar prices have surged to the highest in more than a decade this week, while the raw variety is near the costliest in over six years. Global supply is narrowing, largely because India, one of the top shippers, has cut exports after rains hurt the sugar cane crop and as more sweetener is diverted to biofuel.
According to a Bloomberg survey of traders and analysts, the exports from India are set to almost halve to 6 million tons in the year ending in September from about 11 million tons a year earlier and could slump to as low as 4 million tons next season. Unfortunately, this will reduce supply in a market that’s already been tipped to show a shortage next year by consulting firms Green Pool and Covrig Analytics.
Henrique Akamine, head of sugar and ethanol at Tropical Research Services, says that if India exports fewer sweeteners than expected next season, prices will have to rise to extract sugar from any other part of the world. This is because India is responsible for 6 million tons on our balance sheet for international sugar trade flows in 2023–24.
“If you simply remove even half of what we’re forecasting, the trade flow will go into deficit.” The jump in sugar prices has already worsened the impact of inflation in the UK, with shoppers paying more for baked goods, sweets, and fizzy drinks.
While top shipper Brazil is expecting bumper production of sugar cane, rains have delayed harvesting, and port capacity may constrain supplies to the global market as the country is also gathering a record soybean crop. Output in Thailand, another leading exporter, is also likely to miss forecasts this year.
A steady surge in global consumption and decreasing stockpiles have made supplies from India even more crucial for the world market. In a sign of how important India is, prices soared to a six-year high in January on concerns that the country wouldn’t approve more exports this season.
The drop in Indian exports is due to lower output and more use of sugar cane for biofuel. Heavy rains cut cane yields in Maharashtra, which accounts for more than a third of the country’s sugar output.
The food ministry expects national production to fall to 33.6 million tons in the current season, down from an earlier estimate of 35.2 million tons and 35.9 million tons a year earlier. While it’s still early to assess India’s output for the season starting in October, estimates range from 32 million to 34 million tons, with the potential for an even lower crop if El Nino brings dry weather, traders and analysts said.
Also, PM Modi is pursuing an aggressive biofuel program that will see more sugar cane diverted to make ethanol. The government says the benefits are that it will reduce air pollution, cut oil import bills, make use of excess local production, and boost farmer incomes. The program will take into account how much cane juice is used for making sugar. This season, the government plans to divert 5 million tons of sugar to make ethanol, up from 3.6 million tons a year earlier. The eventual goal is to divert 6 million tons annually toward fuel production by 2025.