he sugar industry in India clearly recognizes the potential for business opportunities abroad. This is apparent because of the Indian sugar mills’ decision to export raw sugar for the first time in three years. India ranks as the second largest sugar producer in the world with an output of 341,200 MT, Brazil topping the list with 7,39,300 MT. Increase in Indian exports is likely to weigh on global prices and cut down the market share of Brazil and Thailand, two major rival sugar suppliers.
Global sugar prices have stretched to seven-month highs. The hike in international prices of raw sugar in conjunction with the steady and rapid depreciation of the rupee has stimulated opportunities for export. Government subsidies have further rendered exports more sustainable. In the last month alone, India gave a green signal for incentives that offer transport subsidy for export. Additionally, farmers will be compensated by means of a direct cane payment with a view to encourage cash-strapped mills to export excess sugar during 2018-2019.
Initially, Indian mills produced white sugar solely for local consumption and were hesitant to sign export contacts as global sugar prices were much lower than local sugar prices. However, the recent surge in international sugar prices and surplus sugar production for two years in a row has compelled Indian mills to venture overseas. The covenants of the export contract state that Indian sugar mills will supply 1,50,000 tonnes of raw sugar on a free-on-board (FOB) basis. The supply will be shipped in November-December and sold for a price of around US$280 per tonne.