INTRODUCTION

India is the second-largest producer of sugar and is also the largest consumer of Sugar in the world. This industry is critical for the country as it is the second-largest agro based industry in India, meets the local demand for sugar, and also provides support to millions of farmers.

India remains a key growth driver for world sugar, growing above the Asian and world consumption growth average.

MARKET SCENARIO

-The Sugar Season (SS) 20-21 started in October 2020 (Sugar Season is from October-September) with an opening inventory of 10.7mn tonnes.

-Sugar output rose by 31% to 142.70 lakh tonnes in the first three-and-a-half months of the SS 20-21

- Indian Sugar Mills Association (ISMA) has projected the sugar output to increase by 13% to 310 lakh tonnes in the SS 20-21 on likely higher availability of sugarcane

EXPORTS

- About 3 lakh tonne of sugar was exported during October-December 2020 as per the Maximum Admissible Export Quota (MAEQ) allotted to sugar mills during the SS 19-20

-Indian sugar companies have contracted more than 83% of the export target of 6 million tonnes for the on-going 2020-21 sugar season

The surge in exports is mainly due to firm global prices, lower production in top sugar producing countries, Brazil and Thailand, export subsidy, and a likely fall in domestic consumption

COVID IMPACT

-With fresh lockdown imposed in many states the local demand for sugar is set to fall during the peak consumption period for the second straight year

-Fall in local demand could increase the sugar inventories putting downward pressure on sugar prices, and also forcing sugar mills to export more affecting the global prices

-Consumption of cold drinks and ice cream, and as a result demand for sugar, rises in India during the summer months that run roughly from March to June

-Sugar consumption was expected to rebound sharply in the SS 20-21 ending on Sept. 30 but the new restrictions imposed by states mean consumption will probably be steady at around last year level

-In the light of the continuing sugar surplus scenario in the domestic market, continued government support would be critical for the profitability of the industry

CONCLUSION

Global sugar supply is expected to fall short and India would b expected to fill this gap benefitting the domestic sugar manufacturers.

Supply has tightened due to poor crops in Thailand and Europe, while India is struggling to export sugar because of COVID-19 logistical challenges.

References:

1. Indian Express

2. The Economic Times

3. Business Standard

4. Ventura Capital Report