A nearly five-million tonnes (mt) sugar deficit projected by the International Sugar Organization (ISO) is likely to keep sugar prices firm this season (October 2020-September 2021) with Brazilian shipping woes likely to help India’s cause to export more of the commodity.

The ISO, in its quarterly outlook, has raised the sugar deficit during the current season to 4.782 mt from its earlier estimate of 3.50 mt three months ago.

This will see production dropping this season by 1.24 per cent to 169.04 mt (171.16 mt), while consumption is seen increasing to 172.82 mt (170.24 mt). This will also see a cut-down in end stocks by 4.91 mt to 92.69 mt this season.

Prices decline

This comes at a time when raw sugar in New York has dropped to 16.10 US cents a pound (₹26,225) a tonne, down about 12.5 per cent from a week ago. However, prices are up four per cent since the beginning of 2021.

Raw sugar prices had topped 17.41 cents a pound (over ₹28,375 a tonne) in the third week of February. On the other hand, white sugar is currently quoted at $462.20 a tonne (₹33,900) in London compared with $480.30 (₹35,000) in the second week of February.

“Prices had increased sharply and dropped on expiry of March contracts resulting in sudden sell-off. Otherwise, chances of the market falling are slim,” said Rahil Shaikh, MEIR Commodities Managing Director and Vice-President of All India Sugar Traders Association (AISTA).

“Global prices jumped sharply and closer to expiry of March contracts, there has been a cut in the positions people were holding. Now, prices reflect the May contracts and that’s why there is a feeling of drop in sugar prices,” said Abinash Varma, Director-General of Indian Sugar Mills Association (ISMA). “The sell-off by funds has been profit-booking. The core sugar traders are still invested in the commodity,” said Praful Vithlani, AISTA President.

Brazil’s logistics woes

Indian exports are still competitive in the global market and enjoying some advantage in view of the problems Brazil is facing in shipping soyabeans that could extend to sugar. Since the Union government announced an incentive of ₹6,000 a tonne for sugar exports, at least 3.2 mt of the commodity have been contracted for shipments abroad. Last year, the export incentive helped in exports of 5.7 mt of sugar.

“So far, 1.6 mt have been lifted from the sugar mills for onward shipping from ports,” said Vithlani.

Export prospects

India is now exporting sugar, both raw and white, to Indonesia, Dubai and Africa.

Exports hold key to the sugar industry’s health in India, particularly when the carryover stocks were a high 11 mt from last season. Sugar shipments, besides infusing liquidity in the industry, will also help mills pay the dues for cane supply to farmers.