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Informist, Wednesday, Mar. 5, 2025

 

By Afra Abubacker and Taniva Singha Roy

 

NEW DELHI/MUMBAI – With sugar prices rising due to a shortfall in production, market participants say an early onset of summer and rising temperatures in the coming months will drive prices even higher. And, with exports allowed since January, Indian mills now have an additional avenue to offload their produce.

 

"Crushing season is ending prematurely. Sugar prices are bound to remain firm," said Atul Chaturvedi, executive chairman of Shree Renuka Sugars. About 186 mills ended crushing operations as of Friday, against 72 units a year ago, according to data from the National Federation of Cooperative Sugar Factories. Many mills have shut down due to lower availability of sugarcane and a drop in the sugar recovery rate.

 

With fewer mills operational, India's sugar production this season was down 14% on year at 21.9 million tonnes as of Friday, according to data from the federation. It expects sugar output in the entire season ending September to stand at 26.5 million tonnes, down 17% on year.

 

Market participants see ex-mill sugar prices rising to INR 4,000-4,150 per 100 kg in Maharashtra and 4,200-4,350 in Uttar Pradesh in the coming months. Currently, S sugar is priced at INR 3,800-3,860 per 100 kg in Maharashtra, and M sugar at INR 4,120-4,170 per 100 kg in Uttar Pradesh.

 

After the government released the sugar sales quota for March last week, prices rose by about INR 60-INR 70 per 100 kg in Uttar Pradesh as the quota is considered insufficient. Prices are likely to increase further in the coming days in anticipation of firm demand, said Naresh Gupta, a trader from north India.

 

In Maharashtra, prices have risen by INR 70-INR 80 per 100 kg since the release of the monthly sales quota, and they are likely to increase further, said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

 

Semal Sudhir Jain, secretary of the Kolhapur Karad Sanghli Sugar Merchants Association, said prices are likely to remain at the same levels till the end of the month and any reversal in the trajectory is unlikely until the arrival of the new crop.

 

"Prices will not moderate. There is an early onset of summer. Earlier, there used to be spring after winter. Now it is summer straightaway from winter," said Somnath Chatterjee, procurement head of ITC Ltd.

 

This year, the all-India mean and minimum temperatures for February were the highest on record. Meanwhile, the average maximum temperature for February rose to the second-highest on record at 29.07 degrees Celsius, almost 1.50 degrees above normal, according to the India Meteorological Department.

 

The weather department has predicted that March will be warmer, with above-normal minimum and maximum temperatures expected in most parts of the country. It also expects an above-normal number of heatwave days in most regions from March to May.

 

With increasing demand during the summer, India's sugar consumption will exceed 29.5 million tonnes, said Rahil Shaikh, managing director of MEIR Commodities. "Sugar production has narrowed down. Sugar prices will firm up," he said.

 

Some, however, do not expect any substantial rise in sugar prices. "There might be some seasonal increase in summer, but prices can be largely contained as there is enough sugar availability in the country," farm expert G.K. Sood said. The government could check sugar prices by directing mills to sell as per the monthly sales quota, he said.

 

To check prices amid the General Election campaign and the summer heat last year, the government had asked mills to sell a record 2.7 million tonnes of sugar in May. For April 2024, the sales quota was set at 2.5 million tonnes. 

 

On Tuesday, the all-India average wholesale price of sugar was INR 4,213.2 per 100 kg, up INR 127 or 3% on year, data from the Department of Consumer Affairs showed.

 

"However, the government seems to be happy with sugar prices (so far). They have given lower quota than last year," Sood said. The government has asked mills to sell 2.3 million tonnes of sugar in March, 2.1% lower than 2.35 million tonnes in March 2024. Following this, sugar prices rose as the market had expected a quota of 2.35-2.40 million tonnes in view of the approaching summer and demand during Ramadan and Holi.

 

Asked if the market was concerned about any export restriction amid a shortfall in production this year, Shaikh said, "There is no scare of export ban in the market. The government gave 1 million tonnes of exports when trade bodies estimated (production of) 26.5-27.3 million tonnes. So why should there be any scare in the market now?" The government might have reconsidered its decision had production estimates fallen drastically to 24 million tonnes or so, he said.

Towards the end of January, the Indian Sugar Mills & Bio-Energy Manufacturers Association estimated sugar production in 2024-25 (Oct-Sep) at 27.3 million tonnes, while the All India Sugar Trade Association pegged it at 26.5 million tonnes.

 

On Jan 20, the government had allowed mills to export 1 million tonnes of sugar by September. India is the second largest exporter of sugar after Brazil.

 

"So far, 500,000 tonnes of exports have been contracted with trade houses. Of this, some 325,000 tonnes have been sold in the international market. The balance continues to be in the hands of exporters," Shaikh said. White sugar is being exported at $535-$540 per tonne, he added. 

 

Since export restrictions were revoked in January, prices of the sweetener have been on an upward trend amid projections of lower production this season. Market participants say the government is unlikely to provide any additional export quota over and above the existing 1 million tonnes. However, they expect it to allow more exports next season and the quota could be announced as early as December, Shaikh said.

 

According to Sood, if the government wants to check prices, it could tap into the opening stock for next season. "Instead of 6 million tonnes, next season would open with 4-5 million tonnes," Sood said. "There is enough sugar supply. Prices are rising on market sentiment. At some point, the government will have to manage the sentiment," he said.  End

 

US$1 = INR 87.12

 

Edited by Avishek Dutta

 

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