Thomas Lyons 
The price of sugar is on the rise, causing concern for the food industry and adding pressure to global food inflation. The cost of refined sugar has surged to its highest point in over a decade, with prices predicted to increase by approximately 11% in March alone. Meanwhile, the price of raw sugar is hovering near its most expensive level in over six years. The tightening of global supplies is largely due to India, one of the world’s top shippers, cutting exports after rains damaged the sugar cane crop and as the country diverts more of the sweetener to make biofuel.
According to a Bloomberg survey of traders and analysts, exports from India are expected to almost halve to 6 million tons in the year ending in September from about 11 million tons a year earlier, and could potentially drop to as low as 4 million tons next season. This reduction in supply is expected to exacerbate a market that is already predicted to show a shortage next year by consultancies Green Pool and Covrig Analytics. If India exports less sweetener than predicted next season, “prices will have to rise to extract sugar from any other part of the world,” warns Henrique Akamine, head of sugar and ethanol at Tropical Research Services.
India is responsible for 6 million tons of international sugar trade flows in 2023-24, says Mr. Akamine. “If you simply remove even half of what we’re forecasting, the trade flow will go into deficit,” he said. While Brazil, another top shipper, is expecting a bumper production of sugar cane, rains have delayed harvesting and port capacity may constrain supplies to the global market as the country is also gathering a record soybean crop. Output in Thailand, another leading exporter, is also likely to miss forecasts this year.
The steady increase in global consumption and declining stockpiles have made supplies from India even more crucial for the world market. In a sign of how important India is, prices soared to a six-year high in January on concerns that the country wouldn’t approve more exports this season. When the government signalled in March that it may allow more shipments, prices eased. However, the drop in Indian exports is due to lower output and more use of sugar cane for biofuel. Heavy rains cut cane yields in Maharashtra, which accounts for more than a third of the country’s sugar output. The food ministry expects national production to fall to 33.6 million tons in the current season, down from an earlier estimate of 35.2 million tons and 35.9 million tons a year earlier. At the same time, Prime Minister Narendra Modi is pursuing an aggressive biofuel programme that will see more sugar cane diverted to make ethanol.
The rise in sugar prices has already had a negative impact on inflation in Britain and beyond, with shoppers paying more for baked goods, sweets, and fizzy drinks. The food industry is also feeling the pressure, with the cost of sugar rising and supply dwindling. As sugar is a key ingredient in many products, the industry will need to find ways to adapt to the changing market conditions. It remains to be seen how the global sugar market will respond to the current challenges, but it is clear that the impact of India’s reduced exports will be felt around the world.
