Due to low cane yields caused by a lack of rain, India is anticipated to forbid mills from exporting sugar starting in the next season in October, reported news agency Reuters citing three government sources.
India's exclusion from the global market would probably push up benchmark prices in New York and London, which are currently trading at multi-year highs, raising concerns about future food market inflation.
"Our primary focus is to fulfil local sugar requirements and produce ethanol from surplus sugarcane," said a government source who asked not to be named in line with official rules. "For the upcoming season, we will not have enough sugar to allocate for export quotas."
After allowing mills to sell a record 11.1 million tonnes of sugar previous season, India only permitted them to export 6.1 million tonnes of sugar during the current season through September 30.
India imposed a 20% tax on sugar exports in 2016 to curb overseas sales.
According to weather department data, monsoon rains have been up to 50% below average so far this year in the key cane-growing regions of the western state of Maharashtra and the southern state of Karnataka, which together produce more than half of all the sugar produced in India.
An industry executive who wished to remain anonymous warned that patchy rainfall would lower sugar production in the 2023–2024 season and even decrease planting for the 2024–2025 season.
For nearly two years, local sugar prices have increased this week, prompting the government to enable mills to sell an additional 200,000 tonnes in August.
"Food inflation is a concern. The recent increase in sugar prices eliminates any possibility of exports," said another government source.
Retail inflation in India increased to 7.44% in July, a 15-month high, and food inflation to 11.5%, the highest level in more than three years.
India's sugar production could fall 3.3% to 31.7 million tonnes in the 2023/24 season.
"We've allowed mills to export large volumes of sugar during the past two years," said the third government source. "But we also have to ensure sufficient supplies and stable prices."
Last month, India surprised customers by forbidding the export of non-basmati white rice. In an effort to lower food prices in advance of the state elections later this year, New Delhi also placed a 40% levy on onion exports last week.
Lower output in Thailand is also anticipated to restrict shipments, according to a Mumbai-based dealer with a global trade business, and Brazil, a big manufacturer, would not be able to make up the difference on its own.
