The Indian sugar market is still focused on the remaining stocks from the 2017/18 and 2018/19 marketing years. The production surge of 34m tonnes each year contributed to the stock-building in the last two years. So far, almost half of the global sugar stocks are held in India, at 17m tonnes and have contributed to the decline of global prices on the New York Intercontinental Exchange (ICE) by 2% y-o-y.
Indian sugar prices traditionally trade at a premium to global prices, thus, limiting Indian exports level. The additional 11m tonnes in stocks (from 2016/17 to 2018/19) encouraged the Indian government to implement export subsidies, to reduce the oversupply situation. The export subsidies narrowed the gap between Indian and global prices but, given the high global availability of sugar as well as the slowing sugar consumption due to health concerns, India has not succeeded in meeting their target to export 5m tonnes (indicated by mills at 3.8m tonnes in September) for 2018/19.
Production in 2019/20 (started in October) is estimated to reduce the glut in the market as it is expected to decline to 29.3m tonnes (-14% y-o-y). Dry conditions during the first half of 2019 caused lower sugarcane yields in Maharashtra and Karnataka states. New export subsidies (around $150/tonne) to support the export of 6m tonnes in 2019/20 are likely to drive Indian sugar prices to competitive levels, but this would add downward pressure on global sugar prices in the next few months.