News sugar market
India continues to dump subsidy sugar on world market
India is also expected to continue to heavily subsidize sugar exports in the 2020/2021 marketing season, in order to reduce domestic stocks. Government sources report this to Reuters news agency. For the third year in a row, the market is therefore flooded with cheap cane sugar from the number 2 in the world.
After Brazil, India is the largest sugar producer in the world. For 2 years now, the government has been using a subsidy scheme whereby cane sugar processors are paid to sell the product on the world market. The country has a gigantic sugar mountain of 11,5 million tons. If less than 5 million tons are exported on an annual basis, the market price in the country crashes. This ultimately has fatal consequences for Indian farmers.
Subsidy without requirements
Royal Cosun chairman Dirk de Lugt language focus on Boerenbusiness recently discussed subsidized sugar exports. In Northwestern Europe, beet cultivation also benefits from financial support (CAP), but an essential difference is that sustainability requirements are set. This is not the case in India, where most sugar cane fields are still burned. The growers and processors are actually strengthened by the support. Production is far above consumption, which means that every year an overproduction has to be fought.
Last year, an export subsidy of 10.448 rupees per tonne was paid. That is converted to more than €120 per tonne. Anonymous government sources report to Reuters news agency that a similar fee is being worked on for next season. A decision on this will be made in October by the cabinet, the Ministry of Finance and the Ministry of Food.
Record exported
According to the same sources, the export subsidy applies to a volume of 6 million tons. In the current season, which runs until October 1, a record amount of 5,5 million tons has been exported by sugar producers. The minimum export level is 5 million tons. Domestic demand of 26 million tons is expected, compared to production of 31 million tons. For October 1, a surplus of 11,5 million tons is expected by the Indian Sugar Mill Association.
The dumping of sugar on the world market affects the sector worldwide. Especially now that top producer Brazil is already putting strong pressure on the market by selling huge quantities of cane sugar. Extra supply can only find a place when the price falls further. Reason for cane sugar colleagues Brazil and Australia to sue India at the WTO. However, the agricultural committee ruled that the subsidies are in line with global policy. Until 2023, the country may not subsidize the sugar itself, but it can subsidize transport, freight costs, marketing, storage and processing.
Criticism at home
Change can sometimes come from within. The corona crisis also leaves deep marks in the country and in the Indian economy. India is in second place for the most infections worldwide (about 4,2 million), after Brazil. The government has paid out about 10% of the promised export subsidies to processors. They then have to pay the money to growers. Paying out such subsidies in times of crisis causes unrest in the political system, which raises the question in India whether it is sustainable. That should become clear by the end of this month.
Niels van der Boom
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