India lockdown: Sugar, edible oil trade take a hit

Singapore — India's sugar and edible oil trade has taken a hit as the country moved into a three weeks nationwide lockdown until mid April in an attempt to combat the coronavirus pandemic.

Indian ports are now allowed to invoke force majeure by the government due to COVID-19. Operations have not completely stopped as ports services such as transportation of goods by water come under the essential services category, but some port activities are affected.

"The delivery of goods is being difficult in this lockdown. The pace of transport is slower and shortage of manpower is making it difficult to operate ports. That is why ports are declaring force majeure," said P. L. Haranadh, deputy chairman of Vishakhapatnam Port Trust.

Shipment delays to hit sugar exports

While the government has given all states the permission to move essential goods including sugar, the movement of sugar from the mills to the ports has been disrupted on the back of transportation issues, market sources said.

In the western state of Maharashtra, a major sugar producing region, mills have been given exemptions during the lockdown. Despite that some mills are finding it extremely difficult to get enough workers to cut the leftover cane, sources said.

"Ports are not functioning at full capacity because there is less labor. It is very difficult to move any sugar via trucks or wagons now given the lockdown," according to a trader.

Buyers and sellers are taking a conservative stance to halt sugar trading for prompt shipment on fears that shipments could be delayed.

"It is very risky to sell anything for April or May shipment. We are also not sure if we can get clearance from destinations too," a Singapore-based white sugar trader said.

India could face difficulty in meeting its export quota of 6 million mt under the Maximum Admissible Export Quota, or MAEQ, for the October-September 2019-20 season.

Platts Analytics has reduced Indian sugar exports estimated for 2019-20 to 4.1 million mt from 4.7 million mt previously, due to the escalation of the coronavirus pandemic on trade flows as well as weaker global sugar prices.

Earlier this year, Indian sugar mills with record stockpiles had the opportunity of resuming sugar exports to Indonesia, as the dry weather situation in Thailand had cut production by 40% year-on-year.

The rising Thai sugar prices has made it unattractive for destination buyers, with Indonesian and Malaysian buyers seeking more competitively priced sugar of Indian and Brazilian origins.

This comes after the Indonesia government had in February reduced the color specification for raw sugar imports to 600 icumsa, from 1,200 icumsa previously - in a bid to boost bilateral efforts to export palm oil to India. Typically, Indian raw sugar has an icumsa of 400 to 800.

With Brazillian exports looming on the horizon, the opportunity for India to export more sugar to Indonesia could be short-lived because of the coronavirus outbreak, trade sources noted.

"Indian exports should be attractive in the first half of 2020. Brazil will start exporting in May which will make their sugar more competitive," a trader based in Singapore told Platts.

Fewer logistics hurt edible oil

Edible oil trade has been affected by logistics issues as truckers are very few on the ground.

"There are some companies still providing trucking services, but these are offered at up to twice the usual rate," said a Mumbai based trader.

Some market participants believed that India's palm oil demand could retreat by 0.4 million metric mt in April and May due to the lockdown. Some are also concerned about the future once the lockdown ends.

"Many consumers have purchased edible oil for the month in anticipation of the lockdown, and the government has requested for edible oil vouchers from refiners to give to the poor. So we are not concerned about spot demand. However, smaller refineries may be forced to shut as they are unable to meet repayments. We think there might be layoffs after April 14 that will pressure consumer demand too," according to a Mumbai source.

Another refinery-based source said, "refineries are also working with limited staff or closing the refinery, as they do not want to deal with the backlash in case any staff tests positive for the virus."

CPO CFR West Coast India was assessed at $605/mt for May on Tuesday, down from a high of $851/mt on January 10, 2019.