Amid oil and wheat shock, Bangladesh braces for a fresh blow on sugar supply as officials in India on Tuesday said the country is set to restrict sugar exports as a precautionary measure to safeguard its own food supplies.
Bangladesh is almost totally dependent on sugar, while neighbouring India is responsible for 15% of raw sugar Bangladeshi factories refine, according to local entrepreneurs. They fear if sugar supply from India stops abruptly, prices in the local market may face wheat or edible oil-like volatility.
Mustafizur Rahman, general manager (Finance) of Abdul Monem Sugar Mills Ltd, said, "About 80% of our total sugar comes from Brazil. However, if India stops exporting, the price will surge in the global market. Losing an easy sugar source like India would create a crisis in Bangladesh."
Sugar prices surged Tk2-Tk3 per kg in the last one month to Tk74 per kg in the wholesale market. The item is at Tk78-Tk80 per kg in retail. According to importers, India's decision to limit sugar export may be reflected on the local prices on Wednesday.
As an act of protectionism, India banned wheat export in May, compounding a worldwide shortfall worsened by the war in Ukraine and exacerbating an already rising flour market in Bangladesh.
Earlier, Argentina and Indonesia's export curbs on edible oil sent a severe price shock to Bangladeshi consumers. Both countries said the curbs were to calm their local markets and contain domestic supplies.
India is the world's biggest sugar producer and the second biggest exporter behind Brazil. Golam Rahman, Managing Director of Deshbandhu Sugar, said any sugar export restriction by the country would certainly hurt its neighbours.
The Indian government is planning to cap sugar exports at 10 million tonnes for the marketing year that runs through September, according to Bloomberg. The aim is to ensure there are adequate stockpiles before the next sugar season starts in October.
India's top sugar customers include Bangladesh, Indonesia, Malaysia and Dubai.
According to the Bangladesh Bureau of Statistics, Bangladesh eats away 1.5 million tonnes of sugar per year. Government mills produce about 25,000 tonnes of sugar from sugarcane, while the remaining demand is met by private refiners after importing raw sugar.
Seven private companies including City Group, Partex, S Alam, Abdul Monem and Deshbandhu import raw sugar from Brazil, India, Australia, United Kingdom and Malaysia, and refine it to meet local demand.
The firms imported unrefined sugar worth Tk6,924 crore last year, while sugar worth Tk1,008 crore came from India.
Reuters in March reported that India was planning to curb sugar exports to keep a lid on local prices and ensure steady supplies in the domestic market.
Lower sugar output in Brazil and high oil prices which encourage mills there to produce more sugarcane-based ethanol have spurred global price gains.
Initially, India planned to cap sugar exports at 8 million tonnes, but the government later decided to allow mills to sell some more sugar on the world market as production estimates were revised upwards.
The Indian Sugar Mills Association, a producers' body, revised its output forecast to 35.5 million tonnes, up from its previous estimate of 31 million tonnes.
According to Reuters, Indian mills have so far signed contracts to export 8.5 million tonnes of sugar in the current 2021/22 marketing year without government subsidies. Out of the contracted 8.5 million tonnes, mills have already dispatched around 7.1 million tonnes of the sweetener.