India to impose restrictions on sugar exports: Here's why
India, the world's second-largest sugar producer, may soon impose restrictions on exports due to dry weather affecting cane crops. This move could tighten global supplies of the sweetener. A decision on the export restrictions is expected soon, with Bloomberg reporting that quotas for some overseas sales may be issued if domestic supply improves. India experienced its weakest monsoon in five years, putting pressure on the Centre to control food inflation ahead of upcoming elections.
Impact of weak monsoon on sugar production
The weak monsoon has left cane crops in India parched, raising concerns over lower sugar output this season. A Bloomberg survey revealed that most respondents believe India may not export any sugar this season due to reduced production. Key growing regions in states like Karnataka and Maharashtra were among the driest areas during this monsoon season, as reported by the weather office.
Global sugar market faces tightening supplies
India's potential export restrictions come at a time when global sugar supplies are already tight. Raw sugar futures reached a 12-year high this September due to concerns about limited supply, despite a bumper harvest in Brazil, the world's top sugar producer. Additionally, Thailand, the world's second-largest exporter, might see a nearly 20% decline in output during the upcoming harvest due to severe drought conditions. The onset of El Niño has led to low rainfall across many parts of Asia.
Implications for India's government and global market
The drop in agricultural output resulting from the weak monsoon will put pressure on Prime Minister Narendra Modi's government to control food inflation before elections next month and in 2024. India had previously started a quota system in 2022 and curtailed sugar exports to roughly six million tons after late rains reduced production. This was much lower in comparison to the 11 million tons a year earlier.
