Regulation sours sugar output
Introduction
• India was among the world’s big sugar suppliers• Until 2 years ago, India sugar production dropped
from 26 m tones in 2007-2008 to 15 m tones in 2008-2009
• With domestic consumption at more than 23 m tones, India has being forced to import
• Problem persists with next season production estimate ranging from 14 m to 17 m tones
Reasons
• Farmer shifted to more profitable crop whose government set minimum prices have risen i.e. rice gain 50% more profitable per one acre
• India’s biggest cane producer, Uttar Pradesh,at the same time shifted production to other crops due to delayed payment resulted from political dispute.
Below are the leading sugar producers for 2005-6. These producers accounted for nearly 80% of the global sugar total of 150 million tons in 2005-6. (The international sugar season runs from September to August.)
Brazil 30 million European Union 22 millionIndia 20 millionChina 10 millionUnited States 7 millionMexico 6 millionSADC 5.7 millionAustralia 5.4 millionThailand 5 millionRussia 2.7 million
Top Ten Sugar Producers
Top Ten Sugar Exporters
Below are the leading sugar exporters for 2005-2006.
Brazil 17.7 millionEuropean Union 8.1 millionAustralia 4.1 million Thailand 2.6 millionSADC 1.6 millionGuatemala 1.5 millionIndia 1.4 millionPersian Gulf 1.3 millionSouth Africa 1.3 millionCuba 1.2 million
Consequence
• Supply of sugar in India falls• World price of sugar rises to the highest
level in 28 years (25 cents/pound)• Production revival is at least 12-18 months
away.
Indian Sugar Market
International Sugar Market
The rest of the world sugar
market
Partial Equilibrium Analysis
Price Price Price
Q Q Q
Pw
P’w
Reference
• Financial Times: Regulation sours sugar outputPublished: September 11 2009By: Amy Kazmin in Kalanda, IndiaAvailable at http://www.ft.com/cms/s/0/1956bbec-9ef5-11de-8013-00144feabdc0.html?nclick_check=1
Thank you
By
Kantaya Pasuhirannikorn ID 5004640388Sarinya Budhkwan ID 5004640941