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Gauri Desai

COVID-19 Impacts on overall industry. Whatever happens in the next five years is completely up to you.

Impact of COVID-19 on Sugar Industry

In its battle against the Corona virus pandemic, the Indian government has extended the March 25th national lockdown till May 3rd. Even though sugar was declared an essential commodity and is exempt from the restrictions of the lockdown, a plunge in institutional use, a shortage of labor for distribution, and limited port operations all will force drops in domestic production, sales and exports.

The ongoing COVID-19 pandemic is expected to put pressure on the sugar consumption patterns as there are curbs on social gatherings and outings. The industry is also facing reduced off-take from beverage and other FMCG companies amid the lockdown. This has even led to fall in domestic & international sugar prices recently.

Covid-19 impact on sugar in the food and beverage industry

The sugar industry plays an important role in maintaining the economy of the country is also facing several challenges in the course of its journey. Recently, the threat which is posed by the novel coronavirus (COVID-19) is impacting sugar sector stakeholders badly. Due to this, the integrated industries all over the world are also facing multiple challenges such as production, transportation among others.

The entire value chain in the sugar sector from sugarcane, sugar, molasses, ethanol, and their subsequent marketing and export has been adversely affected due to the pandemic.

The industry is also facing reduced off-take from associated industries such as beverage and other FMCG companies due to the lockdown. The industries are shut to control the spread of coronavirus, due to which the demand for the sugar declined, and hence sugar sector is declining in generating revenue.

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How COVID-19 could impact the sugar sector?

Sugar stocks have had a tough phase for some time now. For 2 years in succession, Indian sugar market was oversupplied with situation getting slightly better in the 2019-20 sugar cycle (Sugar cycle normally lasts from October to September). 

Although the supply and demand are estimated to be evenly matched in the current sugar cycle of 2019-20, the problem is the legacy stockpiles of sugar that has been brought forward. For example, the last two years alone generated a surplus of over 14 million tonnes of sugar. This glut of supply has led to sugar prices falling by nearly 30% since the beginning of the year.

The export of sugar is also likely to get affected due to fall in international prices and also on account of supply chain disruptions at various ports. The minimum support price (MSP) for sugar and the moratorium allowed by RBI for the debt repayments is certainly giving cushion to the mill owners. However, the increased stock at their ends and delay in receipt of power sales (for integrated sugar mills) from respective state discoms are likely to intensify their working capital requirements and will also result in mounting cane arrears which shall put pressure on their liquidity in the near term, said an analysis done by Care Ratings.

Sugar manufacturers: perspective & initiatives

The outbreak of COVID-19 has brought world to a halt where each and every industry has got an impact of it. This crisis has brought to an unexpected situation through which everyone is going on. With such unscrupulous situation, everyone is trying to get over of it. In all, one of the cannabis related product industry which has fallen badly due to Covid-19 in start of 2020. But rising support from several companies as well as governments are helping the industry to rebuild the position again in market.

Conclusion

The threat posed by the growing pandemic novel coronavirus (COVID-19), has been the most recent once and it is impacting sugar industry stakeholders and its integrated industries, all over the world. Brazil and India are the top producers of sugar across the globe, each producing nearly 25% and 15% of global sugar and sugarcane, respectively. The development of COVID-19 will have a direct effect on the production and consumption of the sugar industry in the short term.

The ongoing COVID-19 pandemic has been putting pressure on the sugar consumption patterns, complemented with a reduced off-take from beverage and other FMCG companies amid the lockdown across multiple countries. As the beverage and sweetener sector is the bulk consumer of sugar, it is likely to adversely affect the consumption owing to the precautionary measures of avoiding social gatherings.

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