India’s Sugar Demand Seen Lower as Lockdown Curbs Sweet Treats

(Bloomberg) -- Sugar demand from sweet-toothed Indians will likely be lower than expected as mall and restaurants closures due to a nationwide lockdown cut consumption of desserts, ice cream and soft drinks.

Demand from the South Asian nation, the world’s biggest consumer, may total 25 million tons to 25.5 million tons in the year that began Oct. 1, compared with 26.5 million tons expected earlier, said Abinash Verma, director general of Indian Sugar Mills Association. That’s compared with 25.5 million tons in 2018-19, he said.

A drop in demand will add to record stockpiles and potentially cut local prices. That may prompt some sugar mills to boost overseas sales in a bid to reduce their carrying costs. Indian sugar mills had inventory of about 14.6 million tons on Oct. 1, enough to meet domestic demand for more than six months.

Sugar consumption rose by about 1 million tons in the five months ended February, however sales may drop by about 1.5 million tons in 2019-20 mainly due to the lockdown that was announced in March, which cut demand for the sweetener from manufacturers of cookies, sweets, ice cream and soft drinks. Industrial use accounts for as much as 65% in India. Local traders may purchase 200,000 tons to 500,000 tons to refill the pipeline stockpiles, according to Verma.

“Sugar sales have been affected due to lockdown across the country,” Verma said in an interview on Wednesday. “After the lockdown is over there may be some spurt in demand from traders to refill the pipeline stocks immediately.”

This year’s exports may exceed 5 million tons by the end of September, helped by demand from countries including Iran and Indonesia, Verma said. Traders in March estimated less than 5 million tons would be shipped. The government wants mills to sell 6 million tons overseas with subsidies to cut bumper stockpiles.

Indian mills have already shipped 3.6 million tons out of about 4.2 million tons contracted for exports so far in 2019-20, Verma said.

“Indonesia will continue to import sugar from India as sugar production in one of their main suppliers Thailand is going to fall sharply due to a drought,” said Verma. Iran and Indonesia are offering higher prices compared with world market rates, he said.

A concessional duty by Indonesia on sugar purchases from India reduces the landed cost of sugar by $20 a ton compared with global prices, Verma said. A shortage in Indonesia has prompted mills in the Southeast Asian country to ask consumers to reduce sugar usage after retail prices rallied to the highest in almost four years.

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