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ANALYSIS: India revises upwards expected sugar output

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The Indian Sugar Mills’ Association (ISMA) has marginally increased its forecast for the country’s October 2019-September 2020 season by 0.5m tonnes to 26.5m tonnes, based on an analysis of satellite images of the cane producing areas.

 

The Indian government has separately announced that it has reallocated unused sugar exports’ quotas of slightly more than 600,000 tonnes of sugar after some producers failed to meet their export targets because of lower output. The government is providing a subsidy equivalent to $145 per tonne to help incentivise exports that could reach 6m tonnes in the 2019-20 season.

 

India’s sugar production lower year-on-year

 

The new figure of 26.5m tonnes is a lot of sugar - but it nevertheless is 6.66m tonnes less than India produced in the 2018-19 season.

 

The supply and demand balance in India, with its annual consumption of some 26m tonnes, could be tight come September, with the possible consequences of domestic prices surging and/or inescapable rationing.

 

India’s ending stocks will be vital. ISMA said these stocks by September 30 2020 are expected to be around 10m tonnes.

 

The government tries to maintain ’buffer’ stocks of 4m tonnes. ISMA said that it expects the "net available sugar balance for sale will be around 6m tonnes, which is considered reasonable".

 

Others might consider it very tight.

 

Global sugar supplies look tight in the short-term

 

On February 24 the annual International Sweetener get-together took place in California, where the consensus was that global sugar supplies will be tight in the short-term but will ease when Brazil’s new-crop comes to market. Most present expected that Brazil’s mills will favour sugar over ethanol production, unlike the previous couple of years.

 

Yet with macro considerations dominating just about all markets - sugar included - what looks sweet today could very easily turn sour in a trice.

 

To halt this global see-saw of over-and-under sugar production, perhaps what is needed is an Opec for sugar, or at least greater co-operation between the two biggest sugar players, India and Brazil.

 

Perhaps one straw in the wind was the recent visit of the Brazilian president, Jair Bolsonaro, to India. In the wake of that, ISMA and Unica (the Brazilian Sugarcane Industry Association) got together to discuss production of ethanol, the fuel that replaced almost half of petrol consumption in Brazil in 2019.

 

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