Or it could trigger an intensification of global food inflation, with India banning sugar exports for the first time in seven years
Due to insufficient rainfall leading to a decrease in sugarcane production, India is expected to ban sugar exports starting from October, which may exacerbate global food inflation.
According to Reuters on August 24th, three unnamed Indian government sources said that India will begin banning sugar exports in the next quarter to address the tight sugar supply and soaring prices caused by the country's reduced sugarcane production. This is the first time in seven years that the Indian government has imposed restrictions on sugar exports. In 2016, the Indian government also imposed a 20% export tax to curb overseas sales of sugar.
The meteorological department stated that the monsoon rainfall in the western state of Maharashtra and the southern state of Karnataka in India has decreased by 50% compared to the average level. And these two areas are the main planting areas for local sugarcane, with sugar production accounting for more than half of the total production. An industry insider stated that insufficient rainfall will lead to a decrease in sugar production from 2023 to 2024, and may even result in a decrease in sugarcane planting area from 2024 to 2025. The data shows that as of now, Indian sugar mills have only exported 6.1 million tons of sugar this quarter, a decrease of nearly half from the record breaking 11.1 million tons of sugar sales in the previous quarter. India's sugar production may decrease by 3.3% to 31.7 million tons from 2023 to 2024.
This week, domestic sugar prices in India have jumped to the highest level in nearly two years, prompting the government to allow sugar mills to sell an additional 200000 tons of sugar in August to adjust supply and demand. Another source said, "In the past two years, we have allowed a large export of sugar, but now we must also ensure that domestic sugar prices are stable and there is sufficient supply." An unnamed government official said, "Our top priority is to meet local sugar demand and use excess sugarcane to produce ethanol, and this quarter's sugar production is no longer sufficient to allocate export quotas."
Data shows that India's retail inflation rate jumped to 7.44% in July, the highest point in 15 months; The food inflation rate has risen to 11.5%, reaching the highest level in over three years. In order to stabilize local food prices, the Indian government issued an export ban on non Basmati white rice in July, and last week began imposing a 40% tariff on onion exports.
Sugar prices in New York and London have been around high points for many years, and India's export restrictions may lead to further increases in sugar prices in these two markets, raising concerns about further inflation in the global food market. A Mumbai distributor of a global trading company has stated that Thailand's sugar production is also lower than expected, which may lead to a decrease in exports, while another major sugar producing country, Brazil, cannot alone fill this production gap.