Can India score big sugar sales without export subsidies?
The Modi administration will likely not continue sugar export subsidies into the 2021/22 market year, per some Indian officials. The government is apparently betting that strong world sugar prices will still be supportive of exports without some subsidies. The milling industry seems relatively pleased by the price hike, equivalent to under 2 percent—while still pushing for a hike in the sugar price floor, which has remained unchanged for over two years.
Indian sugar production has been more stable in the last decade, allowing it to become a more reliable sugar origin, and allowing sugar stocks to build up over the past four seasons. To support both the sugar industry and, indirectly, sugar farmers, the government implemented various sugar and export subsidies in past years.
These sugar subsidies, however, have drawn criticism from other origin countries—including several complaints before the WTO—so letting them expire in the new season would be diplomatically advantageous and be kinder on the national budget. The issue remains a real point of contention, with the Australian industry recently publishing a study that found that overproduction of Indian sugar may have cost Aussie millers some USD 724 million by inflating global supply and depressing prices.
In May 2021, the government had already cut its export subsidy under the Maximum Admissible Export Quota from Rs 6,000 (USD 82) per MT by a third to Rs 4,000 (USD 55) per MT—applicable to all contracts signed after May 20, 2021. The Rs 4,000 figure included Rs 2,400 (USD 33) for internal shipping and handling and Rs 1,600 (USD 22) for ocean freight. At that point, 2020/21 total sales were estimated near 5.85 MMT, per FAS. Major destinations included regional buyers and Africa. We currently estimate India exports 2020/21 above 6.70 MMT and possibly as high as 6.80 MMT.
India’s government does care about the role of exports: As it continues to raise the base price for sugarcane and cane crops have grown, the milling industry has become more dependent on the added income from exports to help pay sugarcane arrears. The base cane price (FRP) for 2021/22 was already raised by Rs 50 per MT to a new record—panned by farmer groups as inadequate. (Some Indian states set higher internal price floors for cane.) A spokesperson argued that at Rs 2,000 (USD 27) per MT of cane, farmers have a theoretical return rate above 50 percent of their costs.
India sugar exports & carryout (FAS) vs. #11 world sugar futures prices
Source: USDA, DTN
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