August 20, 2020: Amid a fall in industry demand for sugar due to coronavirus pandemic, exports are likely to save the day for manufacturers as demand is expected to shoot up. “Sugar offtake in the current sugar season (SS 2020; October 2019-September 2020) is expected to remain more or less at last season levels despite the Covid-19 pandemic as buoyant exports make up for a visible shortfall in domestic consumption,” a CRISIL report said on Wednesday. Industrial demand for sugar makes for the majority of domestic sugar consumption at nearly 60%, however, the same has been dented due to closure of hotels, restaurants and cafes for a large part of 2020. Industrial demand is likely to fall by 8-9%.
On the other hand, household consumption is likely to drop by 2-3% as “prolonged confinement at home has seen a surge in appetite for biscuits and bakery products,” the report said. Household consumption accounts for nearly 40% of the sugar consumption.
What is boosting exports?
The shortfall of about 10-12% in domestic sugar consumption will be more than offset by a surge in demand by foreign nations as the same is likely to spurt more than 30% to nearly 5 million tonne in SS 2020. The increase in sugar demand from abroad is due to lower production in Thailand, which has turned its key importers namely Indonesia, Kenya, Bangladesh, Afghanistan and Iran, towards India. Thailand has reported a 40% drop in its sugar production.
Other reasons have also contributed to a hike in export demand. This includes a weakening of rupee by 3.5%, government subsidy of Rs10.4 per kg and reallocation of export quota.
Meanwhile, in the upcoming festive seasons, the sale of packaged sweet products, such as chocolates and cookies is likely to go up as fear of contamination prevails for loose sweets. While chocolate sales remained stable in the first quarter of the current financial year, the same is also likely to go up in the festive sales.
Source: Financial Express
