India is anticipated to prohibit mills from exporting sugar in the upcoming season beginning in October, suspending shipments for the first time in seven years due to the country's cane production being affected by the lack of rain, according to three government sources.

In the absence of India from the global market, benchmark prices in New York and London, which are currently trading at multi-year highs, are anticipated to rise, raising concerns about further food market inflation.

"Our primary focus is to fulfill local sugar requirements and produce ethanol from surplus sugarcane," said a government source who asked not to be named in line with official rules. "For the upcoming season, we will not have enough sugar to allocate for export quotas."

In contrast to last season, when mills were permitted to sell a record 11.1 million tonnes, India only permitted them to export 6.1 million tonnes of sugar during the current season through September 30.

According to weather department data, monsoon rains have been up to 50% below average so far this year in the key cane-growing regions of the western state of Maharashtra and the southern state of Karnataka, which together produce more than half of all the sugar produced in India.

Patchy rains would cut sugar output in the 2023/24 season and even reduce planting for the 2024/25 season, an industry official, who declined to be named, said.

Local sugar prices jumped this week to their highest level in nearly two years, prompting the government to allow mills to sell an extra 200,000 tonnes in August.

"Food inflation is a concern. The recent increase in sugar prices eliminates any possibility of exports," said another government source.

Retail inflation in India jumped to a 15-month high of 7.44% in July and food inflation to 11.5% - its highest in over three years.

India's sugar production could fall 3.3% to 31.7 million tonnes in the 2023/24 season.

"We've allowed mills to export large volumes of sugar during the past two years," said the third government source. "But we also have to ensure sufficient supplies and stable prices."

Last month, India startled customers by banning the export of non-basmati white rice. In an effort to lower food prices in advance of the state elections later this year, New Delhi also placed a 40% duty on onion exports last week.

Image source: Reuters