India’s sugar exports will fall in the new season, but not by much, supported by another season of strong production, two key analysts said, as investors await an official announcement on shipment quotas.

The Indian Sugar Mills Association on Monday pegged India’s sugar exports in 2022-23, as started this month, at about 9m tonnes – a figure behind only the record volumes shipped last season, on US.

The forecast followed an estimate from the US Department of Agriculture’s New Delhi bureau that exports in the new season will hit 9.39m tonnes – well above the 5.21m-tonne figure that the USDA has officially factored in.

The bureau estimated 2021-22 exports at 11.73m tonnes, well ahead of initial forecasts, and supported by “competitive pricing, rupee depreciation, and reduced supply from Brazil”, the top sugar shipper.

Quota talk

The forecasts come as investors are awaiting an government announcement on the country’s initial export quota for 2022-23, and whether it will revive a controversial subsidy system, the maximum admissible export quota programme (MAEQ).

“We are all convinced that the initial quota will be around 4m-6m tonnes,” said Marex.

It noted too that “current export values are at a premium to the Indian domestic price”, implying strong popularity among mills to ship their sugar – an outcome that the government is cautious of for fear of boosting domestic prices as supplies tighten.

The USDA bureau said that “high sugar prices in India have the potential to push retail inflation upward across the consumer price index.

“High sugar consumption is also expected the upcoming festive season where gifting of traditional sweets and processed foods and the spending on discretionary items are estimated to exceed pre-pandemic levels.”

Last season, exponential export growth seen in the first half of the marketing year… led to domestic pricing and supply concerns”, prompting the government in June to announce a cap on 2021-22 shipments.

Production prospects

The bureau’s 9.39m-tonne export forecast for the new season factored in shipments of some 4.6m tonnes of raw sugar, and 4.8m tonnes of white sugar.

Production was pegged at 35.80m tonnes, down some 1.0m tonnes year on year on  its data, following an “erratic and uneven” monsoon in the key cane-growing state of Uttar Pradesh.

The Indian Sugar Mills Association forecast production of 36.5m tonnes of sugar in the new season, which on its estimates would represent a 700,000-tonne increase year on year.

The association forecast mills diverting 4.5m tonnes of sugar for ethanol in 2022-23, up from 3.4m tonnes last season.