India will play a significant role in 2021-22 season’s global sugar production increasing by six million tonnes (mt) but it could also result in the country carrying over huge stocks to the following season, according to the US Department of Agriculture (USDA).

While the sugar trade in the county agrees with this view, the industry, particularly private mills, think it is too early to talk about the next season.

The USDA also projects India’s sugar exports remaining at the current season’s level of six mt but the trade and industry see various factors deciding the shipments scenario.

In its “Sugar: World Markets and Trade” report, the USDA said global sugar production next season, which is October 2021-September 2022 in most countries, would be 186 mt with the European Union, India and Thailand making up for a fall in Brazil output.

Thailand exports

A feature of next season’s global sugar production is the output in Thailand, whose season begins in December, rebounding by three mt to 10.6 mt on higher yield. The USDA said Thailand will export a record 10.4 mt of sugar next season.

“Thailand will provide us with competition next year. This year, its production was lower,” said Praful Vithalani, President, All India Sugar Traders Association (AISTA).

Thailand produced 14.58 mt of sugar in 2018-19 but since then its production dropped to 8.29 mt in 2019-20 and 7.57 mt this season, respectively.

During the same time, though India’s production dropped in 2019-20, it has rebounded to over 30 mt this season. The Indian Sugar Mills Association (ISMA) has pegged the last season output at 27.42 mt.

At Brazil’s cost

Thailand had exported 10.6 mt during 2018-19 before lower output pulled down its shipments to 6.6 mt during 2019-20 and 7.3 mt this season, respectively.

According to the USDA, Thailand exports will be at the cost of Brazil, whose shipments are expected to decline to 29.17 mt next season from 32.15 mt this season.

Global sugar exports next season are projected to increase to 65.95 mt from 64.24 mt this season with Thailand likely to be the major gainer.

Dwelling on India, the USDA said that production would increase to 34.7 mt, which traders said includes part of the output that goes into the making of ethanol.

“The USDA may be right. We expect sugar production to be 32 mt with another 2.5 mt going into ethanol production,” said Rahil Shaikh, Managing Director, MEIR Commodities India.

Too early for projection

ISMA Director-General Abhinash Varma said that it is too early to project next season’s sugar output. “This year, our production is 32.8 mt but over two mt have gone into ethanol production,” he said.

ISMA will estimate the sugar output based on mapping of the area under sugarcane using satellites by June-end or early July. “We will have to look at the yield and sugar recovery aspects. Monsoon will also have to be good,” Varma said.

Ratings agency CRISIL said that the outlook for a favourable monsoon would ensure in surplus water availability that will support sugar production. However, it sees sugar production being moderated by diversion of cane towards producing ethanol.

As regards Thailand development, the ISMA Director-General said even that was too early for making an estimate as its season synchronises with that of India.

“We cannot be commenting on sugar production or exports now since it is too early,” he added.

Export factors

MEIR Commodities’ Shaikh said that India’s sugar exports were “export scenario dependant, government dependant and policy dependant”.

“Sugar production and export will totally depend on how Indian monsoon pans out. If it turns out to be average, it will be good,” said AISTA’s Vithalani.

If raw sugar prices rule around or above 19 cents a pound (₹30,700 a tonne), then the Indian sugar industry would not require government incentive like this season. “If prices rule below 17 cents a pound (₹27,500 a tonne), the industry will require government help,” Shaikh said.

Currently, raw sugar in New York is ruling at 16.93 cents a pound (₹27,350 a tonne).

Crisil said that India’s exports will continue to be high during 2021-22 in view of low global inventory.

As regards the current season, Vithalani said only small quantities are being exported after the amount allocated for sugar export assistance has got used up.

In December last year, the Centre announced an export incentive of ₹3,500 crore that entailed a sop of ₹6,000 for every tonne of sugar shipped out from the country. On May 20, the Government cut this assistance by ₹60 crore that resulted in every tonne of sugar being exported getting only ₹4,000 as assistance.

Last season, the Centre allocated ₹6,300 crore as export assistance which resulted in sugar mills getting an average of ₹9,500 as sop for export of one tonne of sugar. It helped in exports of 5.7 mt then.

The exports assistance is required to ensure liquidity for the mills and pay sugarcane farmers their dues. This season, the dues are reported to have topped ₹20,000 crore.

Exporters contracted 5.7 mt of sugar for shipments abroad by May 19 this season. “Now, any export that takes place will be under open general license (OGL) only. Therefore, it will be only in small quantities,” Vithalani said.

Shaikh said that India could export another 0.5-0.7 mt of sugar under OGL. “We are still competitive in exports to nearby markets,” he said.

Currently, India is exporting white sugar to Afghanistan, Sri Lanka and the horn of Africa. It is quoting $435-440 (₹31,650- 32,000) a tonne compared with $415-420 (₹30,200-30,550) by other countries.

“We have almost exhausted our raw sugar stocks as crushing has been completed. Unsold raw sugar stocks could be around one lakh tonnes,” the MEIR Commodities India Managing Director said.

The USDA said India’s ending stocks this season is projected to be 15.37 mt, which is 0.5 mt higher than earlier estimates due to lower consumption. The industry has pegged ending stocks at 11 mt.

Next season, the end stocks are estimated to increase to 16.57 mt, but trade and industry participants see some of the surplus being diverted to ethanol production.