INDIA – It is still not clear how much the ban on sugar exports that the world’s second exporter of sugar, India, is set to enact, will have on benchmark prices in New York and London.

Most market analysts have pointed out that the ban will indeed cause a further inflation on global food markets.

Beginning this October, India is expected to ban mills from exporting sugar halting shipments for the first time in seven years, as a lack of rain has cut cane yields, three government sources told Reuters.

“Our primary focus is to fulfill local sugar requirements and produce ethanol from surplus sugarcane,” said a government source who asked not to be named in line with official rules. “For the upcoming season, we will not have enough sugar to allocate for export quotas.”

Already during the current season, the authorities have capped the volume of sugar exportable by the factories at only 6.1 million tonnes against a stock of 11.1 million tonnes shipped in 2021/2022.

Local sugar prices in the country have already jumped to their highest level in nearly two years, prompting the government to allow mills to sell an extra 200,000 tonnes in August.

“We’ve allowed mills to export large volumes of sugar during the past two years,” said the third government source. “But we also have to ensure sufficient supplies and stable prices.”

“Food inflation is a concern. The recent increase in sugar prices eliminates any possibility of exports,” said another government source.

Retail inflation in India jumped to a 15-month high of 7.44% in July and food inflation to 11.5% – its highest in over three years. India’s sugar production could fall 3.3% to 31.7 million tonnes in the 2023/24 season.

Monsoon rains in the top cane-growing districts of the western state of Maharashtra and the southern state of Karnataka, which together account for more than half of India’s total sugar output, have been as much as 50% below average so far this year, weather department data showed.

The below-average rains would cut sugar output in the 2023/24 season and even reduce planting for the 2024/25 season, an industry official, who declined to be named, said.

A Mumbai-based dealer with a global trade house said lower output in Thailand was also expected to reduce shipments and major producer Brazil alone can not fill the gap.

India has imposed an export ban on several food items this year. It surprised buyers last month by imposing a ban on non-basmati white rice exports and a 40% duty on exports of onions as it tries to calm food prices.

Since Zambia heavily relies on rice imports from India for its local market, the ban has caused panic in the country as it would affect the supply of rice for both regular and basmati rice.

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