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 (NYSE:CZZ) and Wilmar International (WLMIY), sugar ETFs like iPath DJ-UBS Sugar TR Sub-Idx ETN (NYSE:SGG) and iPath Pure Beta Sugar ETN (NYSE:SGAR), even syrup manufacturer Corn Products (NYSE:CPO), not to mention Teucrium Corn ETF (NYSE:CORN).
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.