Sugar prices in India have surged by over 6% in the past two weeks, with industry insiders anticipating further hikes as production drops and demand from bulk buyers increases during the peak summer season.
This rise in local sugar prices could benefit sugar manufacturers such as Shree Renuka Sugars, Balrampur Chini, Dwarikesh Sugar, and Dalmia Bharat Sugar, as it will help them pay cane farmers on time, according to dealers. However, it could also exacerbate food inflation and deter the Indian government from allowing more sugar exports, which would support already high global prices.
Ashok Jain, the president of the Bombay Sugar Merchants Association, stated that Maharashtra, the leading sugar producing state, has revised its output downward, causing prices to increase. Dealers estimate that Maharashtra’s sugar production for the marketing year ending on September 30, 2022, will be around 10.5 million tonnes, down from an earlier forecast of 13.7 million tonnes. Jain predicts that prices will rise further in the coming months due to increased demand from bulk buyers during the summer season.
India experiences a surge in sugar demand during the summer months of April to June, owing to the consumption of cold drinks and ice cream. Summer also provides a boost in demand due to the wedding season. Furthermore, demand has risen to a predicted record of 28 million tonnes this marketing year, according to a Mumbai-based dealer at a global trading company.
The Indian government is not likely to permit additional sugar exports, as the closing stock for the season may fall to roughly 5.5 million tonnes, the lowest in six years, the dealer added. This season, India has authorized the export of only 6.1 million tonnes of sugar, compared to the previous year’s record of 11 million tonnes.
One of the main drivers behind the recent surge in sugar prices is the downward revision in production in Maharashtra, which is the country’s leading sugar-producing state. With an earlier forecast of 13.7 million tonnes, dealers are now estimating a production of only around 10.5 million tonnes for the 2022/23 marketing year. This reduction in output has led to a surge in local prices, which has benefitted sugar manufacturers such as Dalmia Bharat Sugar, Balrampur Chini, Shree Renuka Sugars, and Dwarikesh Sugar, as they can pay cane farmers on time. However, the surge in prices could also lead to higher food inflation and discourage the Indian government from permitting more sugar exports.
Read more: Sugar prices go up for third time in a week in Lahore
During the summer months, sugar demand is expected to rise further as the consumption of cold drinks and ice cream climbs. In addition, the upcoming wedding season is expected to boost demand as well. While this will benefit sugar manufacturers, it may result in challenges for consumers who could face higher prices for sugar-based products.
