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Sweet spot: ISO calls for sugar import from India to check global prices

India currently has surplus stocks ranging between 8-10 million tonne and the government has approved a sugar subsidy to encourage some 6 million tonne of exports.

After a couple of years of surplus sugar production across the world, Jose Orive, executive director of the International Sugar Organisation (ISO), has predicted that the global market may move to a deficit in the 2019-20 season.

India is among the few global producers with a surplus and, therefore, the ISO is encouraging neighbouring countries, including Bangladesh, Myanmar, Afghanistan and Indonesia among others to import sugar from India. This will not only improve the world market prices but also stabilise the demand-supply situation, he said.

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Orive, who was speaking to FE on the sidelines of the 2nd International Conference on Sustainability – Innovation & Diversification in Sugar and Allied Industry in Pune on Friday, projected a global sugar deficit of 6.1 million tonne with global production shrinking by 5.5 million tonne to only 170.4 million tonne.

India currently has surplus stocks ranging between 8-10 million tonne and the government has approved a sugar subsidy to encourage some 6 million tonne of exports. Global buyers have been targeting Indian supplies to help meet a global sugar deficit forecast of 6.12 million tonne in 2019-20 by the ISO. The ISO expects a gradual recovery in sugar prices. Global sugar production will decrease mainly because of the fall in production in India, Thailand and USA.

Orive said that record harvest and a consequent supply glut has seen the industry and government move to export surplus sugar to the world market. From a world market perspective, India’s surplus forms part of the global stocks overhang that acts to dampen price levels, Orive said.

“ World market prices in August 2018 returned to the very low levels seen in August 2015 and June 2008. The price lows coincided with huge surplus production and very high global stocks,” he points out. ISO believes that after hitting a 10-year low, sugar prices can see a substantial recovery in 2020-21. However, ISO believes that one will have to be cautious about any increase in sugar prices above 15 cents per pound.

“In 2019,Brazil played its role admirably, maximising its ethanol production to record levels and removing 10 million tonne of sugar from the market. In 2020, the main decision-making uncertainty for Brazilian mills will be whether or not to produce more sugar and this will be based on world prices and the BRL exchange rate.

A slowdown of sugar consumption growth is a key changing component of the global sugar market and is already impacting trade flows, he said. The impact of the anti-sugar campaign and the wave of additional taxes on sugar-containing foodstuff (to fight obesity and diabetes) is seeing negative growth of sugar consumption in both total and per capita terms in a number of pivotal markets, Orive pointed out.

Slowing global population growth is also contributing to easing rates of sugar offtake, he said.

“India has become a large scale sugar exporter giving formidable competition to top exporters,” said Orive. “India has become the largest sugar producer in 2018-19. It will relinquish that position to Brazil again by a short margin,” he added.

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Source: Financial Express