India the harbinger of a sugar shortage?

Posted August 27, 2008

"India’s situation isn’t unique. Worldwide, sugar prices have gained 50% in the last 12 months (33% since the beginning of 2008). But the country may be the canary in the coalmine… or in the sugar refinery, as the case may be." — Stephanie Grimmett

by Stephanie Grimmett

Baltimore — (TFN): India is importing raw sugar for the first time in two and a half years. Well, that’s a bit misleading.

Shree Renuka Sugars, the largest sugar refiner in India, just bought 30,000 metric tons (a little over 33,000 U.S. tons) of raw sugar from Brazil’s Grupo Copersucar (the country’s cooperative sugar and alcohol producer). But the refined sugar it will produce from that purchase has to be sold outside of India.

You see, right now, the Brazilian raw sugar is tax free for Shree Renuka. If the company tried to sell refined sugar made from its Brazilian buy in India, it would have to pay a 60% tax for it. As you can tell, the Indian government tries to discourage sugar imports. But it may soon have to relax its stance.

**** Three Recession-Buster Stocks to see you through the next 6 months: This $5 company has a lock on the key technology in China – and could generate gains of over 1,000%… Insiders are loading up on this battered contrarian energy play that could go up as much as 75% by November… And this tiny biotech holds the secret to crucial early detection of a debilitating disease AND could triple in value by next year. Get our FREE special report… ****

Domestic sugar production could fall 6% in India next year, from 26.5 million tons this year to 22 million tons in 2009, as farmers switch to crops with higher yields. And according to Narendra Murkumbi, Shree Renuka’s managing director, Indian raw sugar just isn’t available for his company to buy.

India’s situation isn’t unique. Worldwide, sugar prices have gained 50% in the last 12 months (33% since the beginning of 2008). But the country may be the canary in the coalmine… or in the sugar refinery, as the case may be.

With the second largest population globally, and the largest sweet tooth, India consumes more sugar than any other country. And its demands are only growing, even as domestic production falls and international sources become more expensive. Could we be watching the beginnings of a sugar shortage? Perhaps you should look into buying stock in a saccharin producer. Fake sugar may soon be big business.

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. You can pick your favorite reader. Or if you prefer, you can have the feed delivered to your email.