New Delhi: Since the rice export ban is a clear signal that the government is concerned about food security and inflation, traders are worried for another food stable: sugar.
Uneven rainfall across India has affected sugarcane cultivation as well. In addition, Pune, known as the sugar hub of Maharashtra, is facing a water crisis with just 19% of water left in dams, show state government’s data.
Shortage of water not only affects the growth of the cane but also has an impact on the extract rate of sugar.
Aditya Jhunjhunwala, president of the Indian Sugar Mills Association (ISMA), told Business Standard sugarcane fields in the main producing regions of Maharashtra and Karnataka didn’t get adequate rain in June, leading to crop stress. The group expects sugar output to drop 3.4% from a year ago to 31.7 million tons in 2023-24, the newspaper reported. However, Jhunjhunwala said supplies can meet domestic demand.
However, food secretary Sanjeev Chopra on August 4 criticized ISMA’s assessment of lower sugar production, saying it’s highly premature and has created panic of a shortage in the country, the Press Trust of India reported.
Meanwhile, expansion of the government-led ethanol programme could cap future sugar exports, Reuters reported.
As more ethanol plants start production, more of the country’s sugarcane crop will be used to make the fuel, limiting the amount of sugar that will be produced.
The association sees mills diverting 4.5 million tons to make ethanol, up 9.8% from a year earlier, said the daily.
According to the daily, for the 2022-23 season, sugar shipments are capped at 6.1 million tons, down from 11 million tons the year before. Next season, only 2 million to 3 million tons will be allowed – or none at all – risking a further surge in global prices, analysts told the business daily.
In April, sugar prices climbed to a six-year high in New York on worries about limited global supplies, Bloomberg reported.
Separately, sugar futures are up about 20% this year, even as they’ve retreated from April’s peak of 26.83 cents a pound, the highest level since 2011, Business Standard reported.
“The market is worried El Niño will bring hotter and drier conditions to South and Southeast Asia, hurting production. Thailand may also see a decline in output,” it said.