India is capping sugar exports at 10 million metric tons for the year through September.
India's government said the move is to ensure domestic sugar availability and ensure price stability.
India's food prices rose 8.38% on-year in April, far outpacing a 0.85% on-year rise in October.
India, a major sugar producer, will soon be restricting sugar exports. It's the latest protectionist move by an expanding list of countries to secure domestic food supplies.
The Indian government said in a Tuesday announcement that it is capping sugar exports at 10 million metric tons for this current marketing year — which runs through September — to ensure domestic availability of the commodity and ensure "price stability." The restriction will start on June 1.
India is the world's second-largest producer and exporter of sugar after Brazil. Major importers of Indian sugar include Indonesia and Sri Lanka. The South Asian country exported 7.2 million tons of sugar in the last marketing year, according to the US Department of Agriculture — well short of its new export cap.
India doesn't face a sugar shortfall, according to the US Department of Agriculture. However, like in many countries, food inflation in India has risen sharply in the last year, putting pressure on the government to soften the impact on the electorate.
"Uncontrolled exports could create scarcity and local prices could spike during festive season," a senior government official told Reuters on Wednesday. India is the world's largest sugar consumer and celebrates its biggest festival, Diwali, in October this year.
International sugar prices have already surged 20% in the last 12 months due to various factors including supply shocks and recovering demand from the pandemic. Also boosting prices is a surge in global energy prices, as the gains are driving mills in Brazil to produce biofuel from sugar-based ethanol instead.
India's move to limit sugar exports came after it banned wheat exports on May 13.
Prices of food and fertilizers have risen the most since 2008 due to Russia's invasion of Ukraine, the World Bank said in an April report. Both countries are major players in the global commodities markets, accounting for much of the world's wheat, sunflower oil, and energy.
To tamp food inflation, some countries around the world have restricted exports. They include Indonesia, which banned palm oil — the world's most-widely consumed vegetable oil — exports for three weeks, and Argentina's ban on exports of certain beef cuts.
The rise of food protectionism will increase the odds of a "sticky global inflationary environment," said CMC Markets (Singapore) analyst Kelvin Wong on Twitter.
Prices of benchmark sugar futures on the Intercontinental Exchange jumped 1% after India's announcement, but were flat at 2 a.m. ET.
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