Indian Sugar Output Concerns Drive Domestic Prices To Six-Year High

Sugar output could fall by 3.3 per cent to 31.7 million metric tons in the new season starting from October 1 as low rainfall hits cane yields in Maharashtra and Karnataka

The government allowed mills to export only 6.1 million metric tons of sugar during the current season to September 30, after letting them sell a record 11.1 million metric tons last season.

Sugar prices in India have risen by more than 3 per cent in a fortnight to their highest level in six years, quoting traders and industry officials news agency Reuters said. The prices have surged due to limited rainfall in the country's key growing regions, hence, raising production concerns for the upcoming season.

According to the report, this could add to food inflation and discourage the central government from allowing sugar exports, supporting global prices which are near their highest in more than a decade. "Sugar mills are worried that production could fall sharply in the new season because of drought. They are not willing to sell at lower price," said Ashok Jain, president of the Bombay Sugar Merchants Association.

Higher prices will, however, improve margins for producers such as Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars, and Dalmia Bharat Sugar, helping them make payments on time to farmers, dealers said.

Sugar output could fall by 3.3 per cent to 31.7 million metric tons in the new season starting from October 1 as low rainfall hits cane yields in Maharashtra and Karnataka, which together account for more than half of total Indian output, a leading trade body estimated.

Although sugar prices rose to Rs 37,760 ($454.80) per metric ton on Tuesday, their highest since October 2017. Indian prices are nearly 38 per cent lower than the global white sugar benchmark. The price rise will dissuade the Indian government from allowing exports in the new season, Jain said.

The government allowed mills to export only 6.1 million metric tons of sugar during the current season to September 30, after letting them sell a record 11.1 million metric tons last season.

The Centre is expected to ban mills from exporting sugar in the season beginning October, halting shipments for the first time in seven years, three government sources told Reuters last month. Sugar prices could rise further in the coming months as stocks are falling, and the peak festive season is approaching, said a Mumbai-based trader.