Following its ban on rice exports, India, the world's largest sugar producer and second-largest exporter, is gearing up to limit sugar exports due to decreased rainfall affecting production. This move is expected to further pressure already elevated sugar prices.
On October 11th, sources cited by media outlets indicated that the Indian government plans to restrict sugar exports for the 2023/24 season starting October 1. This decision will be announced soon, with potential allowances for overseas sales quotas if domestic sugar supply improves.
Data from the Indian Meteorological Department reveals that, so far this year, monsoon rainfall in the primary sugarcane cultivation areas of western Maharashtra and southern Karnataka is 50% below average. Combined, these regions account for over half of India's total sugar production.
Officials suggest that inconsistent rainfall will lead to a decline in sugar production for the 2023/24 season and could even reduce the cultivated area for 2024/25. Sugar production in 2023/24 is projected to decrease by 3.3% to 31.7 million tons.
India had also restricted sugar exports last year. Data indicates that during the 2022/23 season, sugar exports were capped at 6.1 million tons, a significant drop from the record 11 million tons in the previous season.
A September survey by Bloomberg of 14 analysts and traders revealed that the majority believe India might not export any sugar this quarter due to the production decline.
Similarly affected by the El Niño phenomenon, Thailand, the world's second-largest exporter, is expected to see a nearly one-fifth reduction in sugar production in the next season due to severe drought.
While Brazil anticipates a bountiful harvest this season, the decline in sugar production in India and Thailand pushed global sugar prices in September to their highest levels in nearly 13 years. According to data released by the UN Food and Agriculture Organization on October 6th, the sugar price index rose 9.8% month-on-month in September, marking its second consecutive monthly increase and reaching its highest point since November 2010.
At the time of writing, U.S. raw sugar futures fell 0.48% to 26.91, while U.S. No. 11 raw sugar futures declined 0.41% to 26.94.
