Sugar prices expected to rise after permission to export 10 lakh tonnes
21-Jan-2025 03:20 PM
The recent decision by the Central Government to permit the export of 10 lakh tonnes of sugar for the 2024-25 marketing season could lead to an increase in domestic sugar prices, as trade analysts suggest that the balance of supply and demand remains delicate.
Here's a breakdown of the situation:
Current Sugar Availability: As of the start of the marketing season on October 1, 2024, India had an opening stock of 79 lakh tonnes of sugar, with a projected production of 320 lakh tonnes for the season. This brings the total sugar availability to 399 lakh tonnes.
Ethanol Production and Consumption: Out of the total availability, 40 lakh tonnes are expected to be diverted for ethanol production, leaving 359 lakh tonnes of sugar for other uses. Domestic consumption is estimated to be 290 lakh tonnes, which would leave a stock of 69 lakh tonnes. After the government grants export permission for 10 lakh tonnes, the remaining surplus at the end of the season is projected to be 59 lakh tonnes.
Possible Production Shortfall: However, there are concerns about whether sugar production will actually reach the expected 320 lakh tonnes. Several industry forecasts, including from the National Federation of Cooperative Sugar Factories, estimate a significant shortfall, predicting a production drop of up to 49 lakh tonnes compared to the previous season. If these predictions hold true, domestic sugar availability could be lower than anticipated, leading to a tighter supply and potentially higher prices.
In conclusion, while the government’s decision to allow exports may help clear excess stock, the overall impact on domestic prices will depend heavily on whether the sugar production targets are met. A potential shortfall could strain the domestic market and contribute to rising prices in the coming months.