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Informist, Wednesday, Apr. 30, 2025

 

By Taniva Singha Roy

 

MUMBAI – The price of sugar is likely to remain stable in the near term despite a lower production outlook as there is ample carryover stock and demand remains minimal, according to traders. The recently announced lower sales quota for May is unlikely to push up prices beyond the immediate reactions, traders added.

 

Sugar price is around INR 3,950-INR 4,080 per 100 kg, largely similar to the levels seen in the past couple of months. This has to do with the assurance of availability of ample sugar despite a fall in output and dimming purchases. With a carryover stock of 8.0 million tonnes and an estimated sugar output of 26.40 million tonnes, which is lower than the previous season, the total sugar availability in 2024-25 is seen at 34.40 million tonnes. India needs about 28.00 million tonnes for domestic consumption, according to the Indian Sugar Mills & Bio-Energy Manufacturers Association.

 

A significant drop in demand for the sweetener is reflected in the drastic fall in sales quota on a yearly basis. The Centre has set the domestic sugar sales quota for May at 2.35 million tonnes, down nearly 13% from 2.7 million tonnes in May last year. The sugar sector is navigating complex market fundamentals this season--high inventories, a shortfall in production, and a significant slowdown in demand from the last season.

 

Maharashtra's sales quota has been cut by 9.3% on month to 730,305 tonnes in May. The quota for Uttar Pradesh has been raised by 10.6% to 926,634 tonnes, and that for Karnataka reduced by 13.2% to 281,240 tonnes.

 

Last year, due to elections, the government allocated a higher sales quota and prices fell significantly, said Naresh Gupta, a trader from north India. "Moreover, there is lesser demand for the traditional sweetener as people have become more health conscious and other healthier alternatives such as jaggery and khandsari are available. This is why the government has not set a higher quota," Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

 

Trend in the sales of the sweetener so far suggest that domestic sales this year could dip to 28.0–28.5 million tonnes, MEIR Commodities Chairman G.K. Sood had told Informist earlier. Mills had dispatched 29.0 million tonnes of the sweetener domestically in the 2023–24 sugar season (Oct-Sept). 

 

Hence, prices are unlikely to rise in a noteworthy manner, but could inch up slightly, during this month. "May is a peak summer month and there could be demand from institutional buyers such as ice-cream and cold-drink manufacturers," said Gupta.

 

After the release of the sales quota on Monday, prices in Maharashtra increased by INR 30 per 100 kg and could rise further. The rates rose by INR 35 per 100 kg in Uttar Pradesh. However, the increase is only seasonal and the average price might not increase much from the current levels, traders said.

 

In addition, due to an unremunerative minimum selling prices for sugar, the mills are unable to increase market prices of sugar further. The current minimum selling price for sugar is INR 31 per kg.

 

Semal Sudhir Jain, secretary of the Kolhapur Karad Sangli Sugar Merchants Association, said prices are likely to remain at the same levels this month and any reversal in the trajectory is unlikely until the arrival of the new crop in Jun-Jul special season, when sugar grows in parts of Karnataka and Tamil Nadu.

 

GLOBAL DEMAND

 

Sugar consumption has dipped not only in India, but globally. Increased popularity of healthier alternatives has also contributed to falling demand for sugar. The UN Food and Agriculture Organization's sugar price index averaged 116.9 points in March, down 1.4% from February and 12.3% from a year ago.

 

The decline in the sugar price index was mainly driven by signs of weaker global demand, which has alleviated concerns over tight global sugar supplies. Additionally, recent rainfall in key sugarcane-growing areas of southern Brazil, following a period of prolonged dry weather, further contributed to the decline in world sugar prices, according to the US Department of Agriculture.

 

Sugar prices are expected to edge down in 2025-26, with a transition to surplus conditions expected in the second half of 2025, the World Bank said in its commodity market outlook on Tuesday.

 

Owing to a fall in global demand for sugar, demand for Indian sugar overseas has also been declining. Market participants said that after the government lifted ban on exports and allowed 1 million tonnes of sugar to be exported, the demand has not been as much. Around 81,307 tonnes of sugar had been exported as of mid-March, according to data from the Mumbai-based trading house Dr. Amin Controllers Pvt. Ltd.

 

Indian mills are also quoting higher prices, which is also limiting overseas demand. Factories are demanding around INR 44,000 per tonne and then there is additional logistic freight-on-board expense, said Vinod Kumar Jain, executive director, Deccan Sugar Mills Pvt. Ltd. "So, it is not a priority for global buyers and, hence, it is moving out of the country at a slower pace. Higher prices are impacting export demand, but we have time to export till September," he added.

 

Mills are asking for around $562.50 per tonne for good quality sugar, but buyers are willing to pay only $520 per tonne for it, Jain said.  End

 

US$1 = INR 84.49

 

Edited by Deepshikha Bhardwaj

 

 

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