Fall in international price of sugar may impact Indian export of sugar

Sugar prices have declined by nearly $50 per tonne in international markets for the first time in two months. Last week, world market prices of refined sugar were $423 per tonne, while crude sugar was trading at 17 cents per pound. On June 8, the price of refined sugar was $467 per tonne. The price of crude sugar then was 17.80 cents per pound.

Sugar traders believe this could adversely affect the export prospects of Indian sugar. The sugar industry had predicted that global production of sugar would decline this year due to the drought in Brazil. Sugar prices in international markets have been rising for the past couple of months as the demand for ethanol was expected to increase and Brazil’s shift towards more ethanol will also have an impact on sugar production.

The supply of sugar from Brazil to the world market was declining due to the stagnant growth of sugarcane owing to lack of rains. But in the first week of June, Brazil received an average of 15-20 mm of rain. This saved the damaged sugarcane.  

The sugar season in India has just concluded and about 35 lakh tonne additional sugar has been produced compared to last year’s production. Sugar export agreements are in full swing. Further, prices in global markets have come down in anticipation of surplus sugar from India entering the international market. With the possibility of rains in Brazil, more than three million tonnes of sugar is expected to enter the market, traders said. Currently, up to 35% of the sugar season is over in Brazil. 

India, however, is likely to export another 5-6 lakh tonnes under the open general licence. The government in India has allowed exports of 60 lakh tonnes of sugar of which over 50 lakh tonnes have already been exported.  Sri Lanka has banned sugar imports due to excess stocks. Although the price of sugar in the global market has come down, it is expected to remain low only for a short period, traders feel.

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