“No consideration” on export subsidy for Indian sugar creates panic in global sugar market

The address on “no consideration” for the export subsidy of sugar by the Food and Consumer Affairs Minister Piyush Goyal on Friday has already started creating panic in the global sugar market.

In talks with ChiniMandi, prominent independent brokerage houses shared their views.

Michael McDougall – Managing Director at Paragon Global Markets, LLC, shared his views, “The absence of a decision from India is supporting the structure. Perhaps there is also a thought that the subsidy amount could be reduced, thus raising the Indian “ceiling” (selling price) but this rising structure, plus the rising infections form COVID could begin to dampen demand for sugar. The other uncertainty is weather issues being generated by La Nina. Dry weather in Brazil potentially as well as rainy weather in India and Southeast Asia could hurt yield in Brazil and slow harvest in Asia depending on weather and India.”

An international sugar trader who doesn’t want his name to be mentioned shared his views. “The Indian sugar industry has been able to cope up with the perennial situation of excessive sugar stocks after being armed with export subsidy. No subsidy means disrupting the backbone of rural economics as a result there will be a turmoil among farmers and the people dependent on the sugar industry. Although the domestic prices are intact because of Minimum Selling Price (MSP), without exports the total stock in the country will be 15-16 million tonnes, which will play havoc with MSP.”

Mr. Gurdev Gill – Agricultural Options Broker at Marex Spectron said, “My take is that given Food and Public Distribution Minister Piyush Goyal’s speech alongside Food Secretary Sudhanshu Pandey’s comments about expected exports seemingly contradict one another. The international market believes the outcome of the subsidy is still unknown and cannot be relied upon having suffered delays of over 2 months versus 2019. With these delays and uncertainty/confusion there is a degree of risk premium added for now.”

Mr. Arnaldo Luiz Correa – Director at Archer Consulting said, “I think the first reaction will be the collapse of the domestic sugar market in India where prices may come to a point in which both domestic sugar prices and international prices would hover close around. I think it is also important to look at the possible second wave of the pandemic that can worsen the consumption situation in global terms.”

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