Commodity Talk: Sugar rates at 12-year highs on supply shortages, high crude prices: Harjeet Singh Arora of Mastertrust

Global Sugar prices have surged to a 12-year high due to a shortage in supply and an increase in crude oil prices. India being the second largest producer of sugar restricted sugar exports to curb domestic prices because of low monsoon, Harjeet Singh Arora, Managing Director at Mastertrust tells ETMarkets.

Global sugar prices have been on an uptick and are at 12-year high. What is leading to the surge?
Global Sugar prices have surged to a 12-year high due to a shortage in supply and an increase in crude oil prices. India being the second largest producer of sugar restricted sugar exports to curb domestic prices because of low monsoon.

How wide is the demand-supply gap?
India’s sugar production in October-September 2023 is 33.6 million metric tons, post the increase in sugar export by India to 7.4 million tons led to an increase in market prices. Fearing that the sugar supply might not meet domestic demand, the government imposed restrictions on exports. It is expected that the Indian government may continue the sugar export restrictions to meet domestic demand and control domestic sugar prices.

How severe is the impact from El Nino and are we over that phase?
El Nino has impacted sugar prices, production and exports. If El Nino happens again, it will impact sugar production, which means the sugar set aside for export will be less. The monsoon in India was also uneven. It is expected that the impact of El Nino will not impact the FY23-24 crop season but the season thereafter.

Are Indian consumers staring at further shocks given that we are at the beginning of a long festive season and soon the wedding season will start?
Sugar Prices surged ahead of the festive season and wedding season. The government took various measures such as imposing restrictions on the sugar export in order to control rising sugar prices. During the festive season, the government is not expecting any sharp increase in any food-related items.

How much will the import curbs play their part in controlling the prices and where do you see prices going in the next two months?
The government imposed a 100% import duty on all types of sugar in 2018 to protect domestic farmers and to ensure remunerative prices to domestic sugar crop growers as the ex-mill rates have fallen below the cost of production. We believe as the government has already implemented this, it will bode well for the sugarcane prices.

Do you see the ethanol blending programme getting hit if prices remain on the up?
We expect that it is not going to hit the ethanol blending as the government is focused and committed to 20% ethanol blending by 2025. The government is planning to create a carryover stock of ethanol going forward. As per the market sources, the government may increase the ethanol procurement price by Rs 2/litre to Rs 67.60/liter.

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