India may be the only country in the world to fill the global sugar supply gap when the Brazilian crop ends, which the global sugar market owes to an Asian country that was once considered a threat to market stability.
“Without India filling this gap, from November to March or April, there will be a serious problem in the global sugar market,” said Paulo Roberto de Souza, CEO of Alvian Sugar SL, the world’s largest sugar trader.
India’s sugar policies, which include large subsidies, have been questioned for years by rivals in the World Trade Organization, including Brazil and Australia.
In an interview, Susa, a top farmer in Brazil, said sugar purchases would increase as the cost of wind-blown crops and commodities, as well as prices for seafood, increase due to drought in Brazil.
He said sugar-consuming countries have relied heavily on available stocks this year to avoid over-consumption and delivering sugar values.
“Now they have no choice,” he said, adding that an increase in orders in the market by Indian manufacturers is expected, but at a higher price.
Sugar prices have been very high since the beginning of 2017 due to poor production in Brazil, a leading farmer following drought and frost.
Next season, Alvin’s research will not see much progress in Brazil, with sugarcane production expected to be around 530 million tonnes and sugar production in the central-southern region to be 32-32.5 million tonnes.
“The fields have been so badly affected that it looks like we will have La Nina next year, which means there will be less rain in the central-south,” Chouza said.
Alvian predicts global supply deficit to double to 6 million tonnes by 2021/22 (October-September), while global sugar consumption is projected to grow from 1.2 per cent to 0.7 per cent in 2021/22 as the season reopens after the outbreak.
Chowdhury says the price of sugar should be further increased to attract enough Indian sales to fill the market gap.
According to him, Indian sugar export equality – equivalent to the domestic price – is currently 21 cents per pound, already above the future of New York.