Sugar prices in India are set to soar as a severe drought in Maharashtra, the country’s top sugar-producing state, threatens to slash production levels, reported Reuters.
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Government and industry officials told the news agency that the 2023/24 crop year could witness a staggering 14 per cent drop in sugar output, marking the lowest production in four years.
The forecast stems from significantly lower cane yields caused by the driest August experienced in over a century.
This potential reduction in sugar supply may further exacerbate food inflation concerns and discourage the Indian government from permitting sugar exports.
Such a scenario could also provide support to global sugar prices, which are already trading near their highest levels in over a decade.
While this may pose challenges, higher domestic sugar prices could prove beneficial for leading producers such as Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars, and Dalmia Bharat Sugar.
These companies could see improved profit margins, potentially enabling them to make timely payments to farmers.
Sugar production likely to fall
Maharashtra, a pivotal player in India’s sugar production landscape, typically contributes over a third of the nation’s sugar output.
BB Thombare, president of the West Indian Sugar Mills Association, told Reuters that Maharashtra’s sugar production for the upcoming 2023/24 season, commencing on October 1st, is expected to plummet to around 9 million metric tons, down from the 10.5 million tons achieved in the previous year.
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Thombare highlighted the underlying issue, stating, “The sugar cane crop didn’t receive ample rainfall during the crucial growth phase this year. In almost all districts, the crop’s growth is stunted.”
The region grappled with a substantial rainfall deficit in August, receiving 59 per cent less rainfall than normal, aggravating the drought’s impact on cane yields.
Chandrakant Pulkundwar, Maharashtra’s sugar commissioner, echoed these concerns, confirming that sugar mill representatives had reported lower cane yields due to an extended dry spell and soaring temperatures.
Pulkundwar emphasized the urgency of September rainfall to mitigate the damage caused by the prolonged drought.
India’s weather department forecasts that September will witness average rainfall, following the unprecedented dry spell in August.
However, the repercussions of Maharashtra’s dwindling sugar output extend beyond domestic markets.
Ban on sugar exports likely
The state’s production significantly influences India’s ability to export sugar, casting a shadow over overseas shipments in the upcoming season.
A Mumbai-based dealer from a global trading house expressed pessimism about the outlook for sugar exports due to Maharashtra’s impending production decline.
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In the 2021/22 season, Maharashtra achieved a record sugar production of 13.7 million tons, enabling India to export a historic 11.2 million tons. In the following year, as Maharashtra’s output contracted to 10.5 million tons in 2022/23, India scaled back exports to 6.1 million tons.
