SAO PAULO / NEW YORK, Oct. 8 (Reuters) – India may be the only country capable of closing a looming global sugar supply gap as the Brazilian harvest ends, making the global sugar market grateful to the Asian country which was once seen as a threat to market stability.
“If India does not fill this gap, from November to March or April the world sugar market would have a serious problem,” said Paulo Roberto de Souza, managing director of Alvean Sugar SL, the largest sugar trader. in the world.
India’s sugar policies, which include large subsidies, have been challenged for years at the World Trade Organization by competitors like Brazil and Australia.
In an interview, Souza said sugar purchases are set to increase even as the drought-affected harvest in the main Brazilian producer ends and the costs of the commodity, as well as sea freight, have increased. greatly increased.
He said sugar consuming countries have been heavily reliant on available stocks during the year to avoid paying high shipping and sugar values, adding that these stocks are currently at extremely low levels.
“Now they have no choice,” he said, expecting more orders in the market to be met by Indian producers, but at a higher price.
Sugar prices are close to their highest since early 2017, mainly due to low production from the main Brazilian producer following drought and frosts.
Alvean’s research department doesn’t see much improvement in Brazil next season, expecting a cane harvest of around 530 million tonnes and sugar production of around 32-32.5 million tonnes for the central-south region.
“The fields have suffered a lot and it looks like we will have La Nina next year, which means less rain in the center-south,” Souza said.
Alvean predicts that the global supply deficit is expected to almost double in 2021/22 (October-September) from the previous year to 6 million tonnes, while he sees global sugar use increase by 1, 2% in 2021/22 against 0.7% the previous season as countries reopen more after the pandemic.
Souza says sugar prices will have to rise further to attract enough Indian sales to fill the market void.
He says the parity of Indian sugar exports – the equivalent of domestic prices – is currently around 21 cents a pound, already above New York futures contracts.
Report by Roberto Samora and Marcelo Teixeira; Editing by Kirsten Donovan and David Gregorio
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