Indian sugar supply of new crop 2020/21 sharply rises

535

    Porto Alegre, January 11, 2021 – The most recent data from the second USDA’s biannual report on the sugar supply and demand in India show a trend of a strong recovery in the production of the country due to a monsoon season with rain above the historical average of the last 50 years. Owing to this increased supply, stocks must remain high with pressure from industries for exports and an increase in the ethanol blend in gasoline.

     In a very small space and through a brief comment, USDA pointed out that supply keeps rising due to the increase in planted area in India. However, since June 2020 SAFRAS & Mercado has warned its consulting clients that a monsoon season with volumes well above the historical average was also a vector of a strong recovery in Indian cane fields in the current season 2020/21, which started in October 2020. USDA expects that the final supply of the new crop reaches 33 million tons, above the volume indicated by the Indian Sugar Mills Association (ISMA), which predicts a supply of 30.5 million tons. These figures are below the SAFRAS & Mercado’s projection of 35 million tons.

    In its small comment about India, USDA also mentions that demand must be a record in the face of economic growth and that stocks must meet only seven months of demand in the current season. However, SAFRAS & Mercado also notes that India’s economy is one of the most affected by the COVID-19 crisis, with GDP in the second quarter of 2020 having fallen 23.9% for the year, while the third quarter decreased by 7.5%, also in the annual comparison. Therefore, this ‘record demand’ the USDA observes tends to be negatively adjusted, either in the next May or November reports. This high supply with depreciated demand and high stocks means that even the export subsidies of 6 million tons of sugar are not enough to neutralize the pressure from mills on the local government.

     In this context, there are already echoes within the government about the ‘need’ to move up the E20 target planned for 2030 to 2025 or even to the end of 2023. However, it is vital to note that even the E10 estimated for 2021 should be fulfilled by the country, given the limited tone of India’s productive capacity. But it is clear that the trend is already given on the market. In 2020, the mixture ended up being staying 4.8%, against 2.3% in 2019.

SAFRAS Latam