India is the world's second-largest producer of sugar. Last year we exported ~5.7 million tonnes of sugar. But this year we may see a 25% decline in exports.

But why?

Turns out, there is a shortage of shipping containers in India. And it's happening because of something called a “container imbalance”. Think of it this way. The people that lease containers often have to deal with a peculiar problem.

When they ship a consignment to the US for instance, they are hoping that the container can also be used to ship another consignment back home. So when exports match imports, everybody is happy. However, what if you're forced to ship the container back home empty?

Yeah, that's a problem. And when exports vastly outstrip imports, you have a bunch of containers piling up in one place and a deficit in another location creating what is called the container imbalance.

Another reason is that India will now no longer be able to count on Iran, which accounted for close to 20% of the total country's exports last year. Why you ask? Well, turns out that Iran is running with a shortage of rupee.

Here's the thing, India imports most of its oil by paying for this stuff using the US Dollar, but with US sanctions in place, Tehran can no longer trade in US dollars. Which means they'll have to use the Rupee.

And they were willing to do it because they knew they could use the rupee to import essential commodities from India which included Sugar.

But following another set of stringent policies from the US, India stopped buying oil from Iran since 2019

And Iran doesn't have a lot of rupees left. So they're out of the equation as well. Which leaves India with one final option. Make sugar more affordable. Meaning they are now planning to export sugar with the help of government subsidies. Will it be enough?

We don't know yet.