India is the world’s largest producer of sugar and the
second largest exporter behind Brazil. Narendra Modi’s government said it must take measures to maintain sugar stocks in the country after “unprecedented export growth” last year and into the current season.
The move to limit exports comes at a time when annual retail inflation was hitting Asia’s third-largest economy 7.8%, its highest level in almost eight years in April. It’s also another sign of rising food protectionism around the world, as major producers cut farm exports and amplify the supply shock triggered by Russia’s invasion of Ukraine in February. Together, Ukraine and Russia account for about 30% of all wheat exports.
In the current marketing year, which runs from October 2021 to September 2022, Indian sugar mills have signed export contracts for around 9 million tons so far. In the past 12 months, the country has shipped 7 million tons of the sweetener overseas, the highest amount in recent years, according to government data.
White sugar futures traded 1% higher at $556.50 per ton on Wednesday in London. They’re up 13% since early January and are about 26% higher than this time last year.
Russia’s invasion of Ukraine has contributed to an historic shock in commodity markets that will keep global prices high until late 2024, the World Bank said last month. Food prices are expected to rise 22.9% this year, driven by a 40% rise in wheat prices, she added.
Earlier this week, Malaysia restricted exports of chicken to its neighbors, saying “the government’s priority is our own people”. And just days earlier, India had banned wheat exports as life-threatening heat waves slowed production and pushed local prices to record highs. The country is the world’s second-largest wheat producer after China, but it is not a major exporter of the commodity.
India’s Trade Minister Piyush Goyal told the World Economic Forum in Davos on Tuesday that “our export regulation should not affect global markets”.
“We continue to allow exports to vulnerable countries and neighbors,” he added.
Despite these assurances, India’s restrictions underscore the fragility of the global food situation. Global buyers were hoping Indian wheat shipments would help fill the gap left by the war in Europe, which has hit vital agricultural export supplies.
However, there was good news last week. Indonesia announced it would lift an export ban on palm oil introduced in April. The Southeast Asian country is the world’s largest producer of the product, which is widely used as an cooking oil and in many foods.
