India’s sugar production is expected to be lower by around 8% in the ongoing marketing year 2022-23, as compared to the previous year. Production in the ongoing sugar season, which began in October ’22 and will end in September ’23, is marred by bad weather conditions and pest infestation in key cane-growing regions of the country. These factors have led to lower sugarcane production and a fall in crop yield.
Industry body Indian Sugar Mills Association (ISMA) has trimmed its sugar production estimates twice for the current year. The trade body lowered its initial estimate of 36 million tonnes to 34 million tonnes, and then again to 32.8 million tonnes for the sugar season 2022-2023. These estimates are net of diversion of sugar for ethanol production, which is expected to be around 4 million tonnes.
Just a few months ago, everyone was expecting sugar production to outstrip demand in India and globally. However, there are now fears that production may lag demand, causing a deficit in the market.
Lower sugar production and higher demand during the summer season are expected to drive sugar prices up. In some wholesale markets, prices are already approaching 40 per kilogram, up from around 35 per kilogram earlier in the season. Retail prices are also rising, and are now approaching 43 per kilogram.
While surging sugar prices boost realizations of sugar mills, there are fears that the government may step in to keep inflation in sugar prices lower to safeguard end consumers. The sugar industry is a highly regulated industry, with the government controlling cane prices, stocks that mills can hold and disburse every month, and exports.
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