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