India turns ‘preferred’ source for white sugar supply as global market turns volatile

India is becoming a “preferred” source for sugar supplies, particularly white sugar trade in spot, as various factors — from a volatile crude oil price movement to prospects of higher freight rates — are forcing buyers to look for safe, reliable and competitive sellers. 

“In the last three years, we have established as one of the reliable exporters of sugar in the global market. This has helped various countries, especially in the Gulf, to look at Indian sugar,” said Praful Vithalani, President, All India Sugar Traders Association (AISTA). 

With crude oil prices ruling firmly over $110 a barrel in the past week, geopolitical tensions rising and the commodities market turning volatile, there is a renewed demand for Indian sugar, says Rahil Shaikh, Managing Director, MEIR Commodities India Pvt Ltd. 

Ramzan demand

“Ramzan demand has added another dimension to Indian sugar exports,” he said. 

Demand for commodities, including sugar and edible oils, tend to increase in the lead up to Ramzan. Currently, demand for Indian sugar is coming from Bangladesh, Malaysia, Indonesia, West Asia and Africa. 

“We have witnessed a demand of over five lakh tonnes (lt) in the past week, particularly after the Russian-Ukraine conflict worsened,” said Vidya Sagar, VR Director, Bulk Logix. 

However, he said, some traders are only trying to fulfil old contracts and not signing new deals. “The commodities, currency and freight markets are volatile. They have to settle down and find a level before we can commit ourselves,” said Sagar. 

“There is a deficit of sugar in the global market. Buyers look at Brazil and India to meet their needs. But with crude oil prices rising over $90 a barrel, Brazilian sugarcane is being diverted to ethanol improving opportunities for Indian sugar export,” said Abinash Varma, Director-General, Indian Sugar Mills Association (ISMA), the apex body of private sugar mills in the country. 

Sugar export estimate

Last week, ISMA raised the estimates of sugar exports from 60 lt to 75 lt. Shaikh pegs the shipments at 70-72 lt for the current season (October 2021-September 2022). Last season, India exported a record 71 lt of sugar. 

On Monday, benchmark raw sugar futures on Intercontinental Exchange was quoted near a three-month high of 19.35 US cents a pound ($430 a tonne), up over 7.5 per cent in the past week. White sugar was quoted at $532.30 (₹40,975) a tonne in London. 

Sugar prices, which were hovering around 18 cents a pound before the Russian-Ukraine conflict flared up, have gained mainly on crude oil prices soaring over 30 per cent last week. On Monday, Brent crude rose to 14-year high of $139 a barrel before easing to below $130. 

With crushing of sugarcane set to end soon in the country, the trade sees more scope for white sugar shipments since raw sugar might not be available after April-end or the latest mid-May. 

Raw sugar output

“Production of raw sugar is almost getting over. It should end before the end of this month,” said ISMA’s Varma. 

“Raw sugar will be available until, say, April-end or the utmost the middle of May. After that, we will have only white sugar,” said MEIR Commodities’ Shaikh.

“Of late, there have been sharp movements in the sugar futures. Within two days, prices rise or drop by 8-10 per cent. This makes it difficult to trade in raw sugar and contracts are entered in advance,” said AISTA’s Vithalani. 

Some traders in the Gulf bring sugar into the region and hold the inventory for at least two months. With such sort of volatility in the market, they see India as a better option since Indian cargoes can reach Gulf within a short span of time between one week to 10 days. 

“This is making Indian sugar a preferred choice with the added dimension of lower freight costs compared with countries such as Brazil,” said Vithalani.

“India has emerged as a country that could be relied upon for immediate needs not just for sugar but for other agricultural commodities too. In fact, Pakistan and Myanmar are the other two countries that Asia and North Africa can turn to for such requirements,” said Bulk Logix’s Sagar. 

‘Golden phase’

Indian sugar sector is going through a “golden” phase with higher sugar production, he said. 

Last week, ISMA estimated this season’s sugar production at 33.3 million tonnes (mt) compared with 31 mt last season. Robin Shaw, sugar analyst at UK-based Marex Spectron, which provides commodities brokerage services, had pegged the production at 32.5 mt. 

“The Indian sugar industry has become a three-tiered one — domestic, exports and ethanol. Therefore, it is nicely balanced,” said Vithalani.

Sagar said with ethanol “mix” coming into picture for the sugar industry, production has gained naturally. “The industry’s capacity is being raised, new distilleries are being set up and molasses offtake is good,” he said. 

On the white sugar front, trade with Afghanistan, which was affected following an internal crisis, has resumed. “We are shipping out 30,000-40,000 tonnes a month,” said Shaikh. 

Sugar to Afghanistan goes via Pakistan after landing at Qasim port, Karachi. Last week, Indian sugar entered Uzbekistan for the first time though the shipments were a meagre 90 tonnes. 

“Exports could exceed current estimates of 75 lt since this is the only sixth month of the season and we have already signed nearly 60 lt,” said Vithalani.

Of the contracts signed till now, nearly 46 lt have been exported. The rest could take two months. 

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