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ANALYSIS: India's bumper harvest plays against La Nina droughts elsewhere

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Amid ructions over proposed new farm laws - the minister for food procesing has resigned - India is enjoying a bumper kharif (summer season) crop, expected to reach a record 144.52m tonnes of grains in the crop year to June 2021.

 

The better-than-average monsoon rainfall - on which India depends for 70% of its irrigation - is behind this record harvest, which will enable India to boost exports of everything from rice to sugar, helping to put a lid on international price rises.

 

Sugarcane production is expected to rise by at least 12% year-on-year, while oilseeds’ output is seen at 25.73m tonnes, 15% higher year-on-year, reducing India’s need to import edible oils such as palm oil from Indonesia and Malaya.

 

Biggest consumer turns big exporter

 

India is the world’s biggest sugar consumer but is looking at a surplus of as much as 6.5m tonnes from its October 2020-September 2021 marketing year’s production of 32.5m tonnes.

 

According to the food ministry, India’s sugar exports in the season just ended will rise to a record of more than 5.7m tonnes, helped by a subsidy of more than Rupees 62bn (more than $839m) to export 6m tonnes to encourage mills to ship excess sugar.

 

Further support comes from a 7% depreciation of the Rupee against the US dollar this year, making India’s exports more competitive.

 

India’s sugar exports have also benefitted from poor output from drought-affected Thailand which has been unable to supply so much (and whose output continues to be low, probably down to less than 8m tonnes in 2020-21) to Asian markets such as Indonesia and Malaysia.

 

Sugar demand recovery in sight

 

As if in tune with the large forecast for India’s 2020-21 sugar crop, Rabobank has just raised its estimate for global sugar consumption growth in 2020-21 to 1.9%, offsetting an estimated fall of 1.5% in 2019-20 due to the impact of Covid-19. It sees the global balance in 2020-21 as moving from a relatively small 1m tonne deficit this year to a tiny surplus of 200,000 tonnes next season.

 

It points to what it calls a "well-supplied market in the coming months" with raw sugar prices continuing to trade in the 11 to 13 cents per pound range.

 

Uncertainties, not least weather, persist

 

Potentially upsetting this apparently stable apple cart are, we feel, weather concerns, particularly the duration and severity of the La Nina event which is now settling in for the next few months, and which will throw a spanner in the works of many crop estimates. Argentina, for example, is hastily revising down expectations for its wheat ouput.

 

La Ninas often result in dry conditions in south America. In Brazil the sugarcane industry group Unica has just said that fires in the key sugar centre-south region are unlikely to affect production for the 2019-20 season, as canes have already been cut, but could well reduce 2020-21’s crop.

 

The epicentre of Brazilian sugarcane production received in August under 10% of the normal rainfall for the time of year.

 

Raw sugar futures have had a rollercoaster year, peaking at close to 16 cents per pound in February and trading today around 12.79 cents.

 

More volatility within a tight range is to be expected as La Nina deals the cards in its hand.

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