The country's sugar exports are expected to increase to around 9-10 million tonnes in sugar season 2022, beginning October, following lower production in Brazil due to adverse weather conditions, according to a report.
Ind-Ra expects the total exports for SS22 (Sugar Season 2022) to rise to 9-10 million tonnes, surpassing the previous high of 7.2 million tonnes shipped in SS21, as the lower production in Brazil (which is down 40 per cent year-on-year in first 1.5 months ended mid-May 2022) due to adverse weather conditions and delayed harvesting.
Brazil is the largest exporter of sugar, constituting 35-45 per cent of the global trade, and a fall in its exports in the current season could result in India's share rising to around 15 per cent, the Ind-Ra report stated.
However, Ind-Ra believed exports were anyway unlikely to exceed 10 million tonnes, given the rebound in production in Thailand after two consecutive seasons of decline.
As a result, the restriction is unlikely to materially affect the sector, although any issues in the mill-wise approval process could act as a dampener, it added.
Meanwhile, with two successive seasons of production deficit, international sugar prices hit a five-year high of over 20 cents per pound in April 2022, averaging around 19 cents per pound till now in SS22.
While India's export restriction has not affected prices meaningfully, prices are likely to remain robust with a lower cane output and sugar mix in Brazil, which bodes well for Indian exports, Ind-Ra said.
It said that despite producing a high-quality sugar, the competitiveness of Indian exports is affected by the country's high cane costs relative to other major producers, including Brazil, Thailand and Australia, rendering exports unviable without subsidy until about a year back.
After hitting a historical high of 14.6 million tonnes at the end of SS19, sugar stocks have been moderating, it added.
Despite an increase in the production, higher exports and diversion towards ethanol are likely to reduce the sugar stock further to around 7 million tonnes at end-SS22, although still higher than the normative carry forward requirement of around 5.5 million tonnes.
India's gross sugar production (before ethanol diversion) increased to 38.3 million tonnes in SS22 (up to mid-May), up 5.8 million tonnes mainly due to an increase in the production in Maharashtra and Karnataka, it said.
However, with a likely increase in sugar diversion towards ethanol to 3.4 million tonnes (SS21: 2 million tonnes), the net sugar production is likely to come in at 35.5 million tonnes while consumption could continue to grow at around 2 per cent, increasing to 27.2 million tonnes in SS22.
Therefore, while consumption is likely to grow at a modest rate of 1-2 per cent, the increase in cane diversion towards ethanol growth would result in an exportable surplus of 6-8 million tonnes in SS23 (depending on cane output), hence maintaining a healthy domestic balance, it added.