India's sweet tooth likely to force sugar imports

Demand for cookies and candy in India has reached the point where the country — the world’s largest sugar consumer — can no longer meet its long-term supply needs.

The commodity gurus at Standard Chartered now believe India could run short of sugar by October of next year, after which point it could end up importing sweetener for the foreseeable future.

As it is, China and Indonesia are net sugar importers. India has mostly managed to handle its needs internally, but unreliable harvests have forced local confectioners and soda bottlers to buy from Thailand and other countries from time to time.

If India swings to importing sugar on a more regular basis, Standard Chartered thinks the commodity could enter a “sustained bull cycle” — and this is after a 48% increase in sugar prices over the last year.

India currently consumes 23 million tons of sugar a year, but Delhi’s attempts to ensure that the country is self-sustaining on sweetener have backfired.

High mandated prices on raw cane force refiners to lose money on every ton of sugar they end up producing, driving them from the market and leaving farmers to destroy their crops.

In all, it could take an extra 8 million tons of sugar a year to meet the country’s needs.

This is another sign that we may have food inflation after all. Rice markets are getting tight and everyone is upgrading their corn forecasts — and remember, corn is often processed into syrup as a sugar substitute.

There are a number of ways to take advantage of this change in the market: plantation operators Cosan (CZZ) and Wilmar International (WLMIY), sugar ETFs SGG and SGAR, even syrup manufacturer Corn Products (CPO), not to mention CORN.

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