Covid-19 hits sugar supply chain, global prices; recovery likely soon

The pandemic Covid-19 scare, which continues to slow down the global economy, has cast its shadow on the domestic sugar supply chain with sugar off take from mills falling in last fortnight. Even international sugar prices have also corrected from $15 per pound to below $12.

According to the Indian Sugar Mills Association (ISMA), the outbreak has pulled down sugar off-take from mills over the last 15 days and the sugar stock in the wholesale and retail market is understood to have been sold in the last couple of weeks.

According to market watchers, fresh sugar procurement from mills would start soon since the supply chain would have largely dried up during the last couple of weeks, which should control sugar prices while the fresh buying should help the domestic mills.

ISMA stated that, the current “unprecedented” situation due to the outbreak of Covid-19 has impacted the global sugar prices, although the impact could be temporary and there are indications of fresh export opportunities in Indonesia.

ISMA said the shortfall in Thailand sugar production by 5 MT and the decision of Indonesia to allow sugar at a concessional import duty from India, Australia and Thailand has provided lucrative offshore opportunities to the Indian companies.

Besides, Indonesia has issued an additional import quota to its refineries, and considering that sugar availability from Thailand is already lower by 5 MT, the Indian raw sugar stands a good chance of exporting to Indonesia.

So far, the Indian mills have dispatched almost 3 million tonnes (MT) of sugar, of the almost 3.8 MT contracted, for export against the Maximum Admissible Export Quantity (MAEQ) of 6 MT till March 15, 2020. MAEQ is determined by the central government for mills for direct export or through a merchant exporter.

Meanwhile, the domestic mills have produced more than 21.58 MT of the sweetener till March 15 in the current 2019-20 sugarcane crushing season against 27.36 MT during the corresponding period last year, thus producing 21 per cent less sugar, majorly due to low production in Maharashtra, which was hit by unseasonal rains and flooding last year.

This season, 457 sugar mills had started crushing operations against 527 mills last year, a downfall of 70 units across India.