The government will cap sugar exports at 10 million tons for the marketing year that runs through September, according to a statement from the food ministry late on Tuesday, confirming an earlier Bloomberg News story. The aim is to maintain domestic availability of sugar and safeguard interests of consumers by keeping prices under control, it said.
India was the world’s biggest sugar exporter after Brazil last year, and counts Bangladesh, Indonesia, Malaysia and Dubai among its top customers.
India took the world by surprise earlier this month when it curbed exports of wheat after a heatwave destroyed some crops, causing a jump in benchmark prices. Steps by governments to ban sales abroad, particularly in Asia, have ramped up in recent weeks since Russia’s invasion of Ukraine sparked a further surge in already-soaring global food prices.
Other recent measures by governments in Asia include Indonesia’s ban on palm oil exports and Malaysia halting chicken sales abroad.
The latest step on sugar appears to be an extreme case of precaution given domestic supplies are abundant. India is expected to produce 35 million tons this season and consume 27 million tons, according to the Indian Sugar Mills Association. Including last season’s stockpiles of about 8.2 million tons, it has a surplus of 16 million, including as much as 10 million for exports.
India rarely shipped more than 7 million tons until last year, when exports hit a record 7.2 million. Sugar mills tended to rely on government subsidies to boost exports. However, global prices have jumped almost 20% in the past year, allowing India to increase shipments without subsidies. There were expectations for exports to range between 9 million and 11 million tons this season.
“Some in the market were expecting as much as 11 million tons, so at least the news puts a cap on expectations," said Michael McDougall, managing director at Paragon Global Markets LLC.
An export halt may support the global sugar market given India is a major producer and exporter.
Companies have signed deals to export about 9 million tons since Oct. 1 last year, out of which a record 7.8 million have already been shipped, according to the statement.
The sugar move will be less disruptive for market operations, “unlike the wheat export ban, where trade was caught off guard," Somit Banerjee, head of trading at Dubai-based refiner Al Khaleej Sugar Co., said before the announement.