India Puts Ban On Sugar Exports: What The Future Holds?
India’s
Ministry of Commerce has just announced that the country will be placing an
export ban on all domestically produced sugar beginning April 1, 2016. This is no small decision as India’s
sugar industry stands to lose nearly $1 billion as a result of this policy
change, but what will be the implications for the rest of the world’s sugar
market? In this article, we’ll explain why India has decided to place an export
ban on sugar and what other countries may do as a result of this action.
The Problem
Sugar imports into India have
been on a steady decline since 2013. A combination of high taxes, tight quotas,
low Indian sugar prices, and an increase in domestic production has put a brake
on imports. Sugar traders who operate within India have diverted much of their
resources to other markets such as Vietnam and China, where prices are higher
than in India. To make matters worse for sugar importers, government officials
have made it clear that no new import licenses will be issued unless there is a
corresponding drop in sugar stocks at local warehouses. This means that even if
new licenses were issued, they would not be able to meet demand. For sugar
exporters, all signs point towards a market with limited opportunity for
growth. As the sugar trade moves away from India, sugar
producers need to look elsewhere for opportunities to grow their businesses and
diversify risk.
How It Affects Us
The Indian
government has decided to ban all sugar
exports in order to support its domestic farmers. This raises many
questions: how will India continue to feed its people if they are no longer
producing enough sugar? How will American consumers feel about paying higher
prices for a product that we import almost half of our supply from? Will there
be ripples throughout other countries that export or import sugar (e.g.,
Brazil, Thailand, Colombia)? To answer these questions, it is important to
understand what led up to India’s decision as well as what may happen next.
Specifically, in order to address these questions, we need an overview of
India’s reliance on sugar production as well as an analysis of domestic versus
international market forces impacting them.
The Solution
For Sugar
importers in India, it will be of utmost importance to ensure they keep a
steady supply of sugar coming in, especially during those critical months when
sugarcane harvesting is at its peak. Sugar exporters with plants already
established will also need to ensure that they continue to increase their
exports as demand rises across Europe and beyond. For example, one of our
existing clients has planned to add another 400,000 tonnes of production over
2017, which should easily accommodate export increases if need be. In
conclusion, we feel that a ban on sugar imports and exports from India is not
likely given how much political capital has been invested into getting foreign
companies set up here – and how much interest there is from investors who want
a piece of India’s $1 billion sweetener pie.
Final Thoughts
India has
placed a ban on sugar exports after two years of failed price negotiations
between cane growers and millers. It’s likely that if prices don’t pick up by
early next year, India will export even less sugar—and possibly none at all.
The reason? With excess sugar currently in supply, exporters can barely make a
profit. If they were to lower their prices, they’d only be hurting themselves.
Both domestic prices and global demand need to rise if Indian businesses are
going to start shipping abroad again. Until then, it looks like India will have
no choice but to import more sugar to meet its own needs as mills refuse to
sell into a market where producers are unlikely to turn a profit. Continue
reading about Sugar
Imports in India.
The Problem
Sugar imports into India have
been on a steady decline since 2013. A combination of high taxes, tight quotas,
low Indian sugar prices, and an increase in domestic production has put a brake
on imports. Sugar traders who operate within India have diverted much of their
resources to other markets such as Vietnam and China, where prices are higher
than in India. To make matters worse for sugar importers, government officials
have made it clear that no new import licenses will be issued unless there is a
corresponding drop in sugar stocks at local warehouses. This means that even if
new licenses were issued, they would not be able to meet demand. For sugar
exporters, all signs point towards a market with limited opportunity for
growth. As the sugar trade moves away from India, sugar
producers need to look elsewhere for opportunities to grow their businesses and
diversify risk.
How It Affects Us
The Indian
government has decided to ban all sugar
exports in order to support its domestic farmers. This raises many
questions: how will India continue to feed its people if they are no longer
producing enough sugar? How will American consumers feel about paying higher
prices for a product that we import almost half of our supply from? Will there
be ripples throughout other countries that export or import sugar (e.g.,
Brazil, Thailand, Colombia)? To answer these questions, it is important to
understand what led up to India’s decision as well as what may happen next.
Specifically, in order to address these questions, we need an overview of
India’s reliance on sugar production as well as an analysis of domestic versus
international market forces impacting them.
The Solution
For Sugar
importers in India, it will be of utmost importance to ensure they keep a
steady supply of sugar coming in, especially during those critical months when
sugarcane harvesting is at its peak. Sugar exporters with plants already
established will also need to ensure that they continue to increase their
exports as demand rises across Europe and beyond. For example, one of our
existing clients has planned to add another 400,000 tonnes of production over
2017, which should easily accommodate export increases if need be. In
conclusion, we feel that a ban on sugar imports and exports from India is not
likely given how much political capital has been invested into getting foreign
companies set up here – and how much interest there is from investors who want
a piece of India’s $1 billion sweetener pie.
Final Thoughts
India has
placed a ban on sugar exports after two years of failed price negotiations
between cane growers and millers. It’s likely that if prices don’t pick up by
early next year, India will export even less sugar—and possibly none at all.
The reason? With excess sugar currently in supply, exporters can barely make a
profit. If they were to lower their prices, they’d only be hurting themselves.
Both domestic prices and global demand need to rise if Indian businesses are
going to start shipping abroad again. Until then, it looks like India will have
no choice but to import more sugar to meet its own needs as mills refuse to
sell into a market where producers are unlikely to turn a profit. Continue
reading about Sugar
Imports in India.
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