India is allegedly mulling a ban on sugar exports for the following season, which begins in October, citing lower cane yields due to insufficient rainfall.
According to Reuters, this prospective move is being considered in reaction to the negative consequences of poor monsoon rains on important cane-producing regions, especially Maharashtra and Karnataka, which have had rainfall levels up to 50% below the typical average.
Such a restriction would be a change from the previous seven years, with the potential to raise global benchmark sugar prices.
In turn, this could intensify inflationary pressures in global food markets.
The context for this expected decision is India's growing worry over food inflation. Retail inflation in the United States reached a 15-month high of 7.4 per cent in July, accompanied by food inflation of 11.5 per cent, the highest level in more than three years.
The predicted prohibition is expected to reduce sugar production in the forthcoming 2023/24 season, potentially by 3.3 percent to 31.7 million tonnes.
This comes after India granted a limited export quota of 6.1 million tonnes in the current season, down from 11.1 million tonnes the previous season.
The Indian government is currently focusing on domestic sugar demand and the use of extra sugarcane for ethanol production in order to secure supplies and preserve price stability within the country.
Given the potential impact on food inflation, the government is concerned about guaranteeing a sufficient supply of sugar for its inhabitants.
The recent hike in sugar prices, together with similar moves such as the prohibition of non-basmati white rice exports and the implementation of a 40% levy on onion exports, emphasizes the government's intention to confront food inflation.
These actions are part of a larger campaign to control food costs ahead of upcoming state elections.
This issue has far-reaching global repercussions. Thailand's limited output, combined with Brazil's inability to fully offset the supply deficit, might worsen global supply problems.
As India considers suspending sugar exports, the consequences will echo throughout the global sugar market, potentially impacting food prices on a worldwide scale.
