India, historically an occasional sugar importer in bulk, will remain an exporter the “next few years at least”, thanks to the enthusiasm among farmers for growing cane – a factor which has ended the country’s notorious sugar cycle too.
Historically, India, the world’s second-ranked sugar producer and top consumer, operated on a five-year sugar cycle – three years of high prices, which ended up spurring overproduction, and was followed by two years of weak values, encouraging farmers to choose other crops.
However, this cycle has been undermined by state-regulated cane prices which have maintained the appeal of growing cane, said Abinash Verma, director general of the Indian Sugar Mills Association.
The guaranteed price of 2,300 rupees per tonne of cane, compared with for example the 1,360 rupees per quintal for rice and 1,450 rupees per tonne for wheat, meant that cane “is the most remunerative crop.
“Returns are 1.5 times, 50% more, than what farmers get for competing crops,” Mr Verma told the International Sugar Organization seminar in London.
“That’s why we have seen the sugar production cycle has not returned in India,” with the country now looking like, in 2015-16, achieving a sixth successive year of output surplus.
‘Don’t be surprised’
The extra sugar output has stemmed the need for India to rely too on occasional imports, which in 2009-10 topped 2.4m tonnes.
“India has become structurally a net surplus sugar producer,” Mr Verma said.
Indeed, the country “will be a net exporter of sugar for the next few years,” remaining “in the global market for the next few years at least.
“Don’t be surprised if India remains an exporter of sugar,” he told delegates.
The issue for Indian exports is their relatively high price, with the country’s cost of production relatively high – estimated separately by consultancy Green Pool at 24 cents per pound, compared with 12 cents a pound in Brazil and 14.5-15 cents a pound in Australia and Thailand.
Nonetheless, it could be worth it for Indian sugar mills to export sugar at loss given the impact that this would have on tightening domestic supplies and lifting domestic prices, Mr Verma said.
For India to export some 10% of its sugar might result in a 5% rise in domestic values, he told Agrimoney.com.
This would make exports worthwhile without government subsidy, he said, as reports were emerging of fresh Indian plans to support exports, talk which sent prices tumbling on Monday.
However, a longer-term solution for the excess output could involve a reform of the sugar cane pricing control policy, the formation of a buffer stock, and expansion in India’s ethanol sector.
India’s government “has been very, very positive” on ethanol, Mr Verma said, flagging plans to boost the blend rate into gasoline to 10%.