India sugar output may fall on weak rains

MUMBAI: India’s sugar production could fall 3.3% to 31.7 million metric tonnes in the 2023/24 marketing year, which starts on Oct. 1, a leading trade body said on Wednesday, as lower rainfall in key producing states could dent yields.

Lower sugar production would reduce exports from the world’s second-biggest producer of the sweetener and support global prices, which are trading near multi-year highs.

Sugar output is expected to fall in western state of Maharashtra and neighbouring Karnataka, which together account for more than half of India’s total output, the Indian Sugar Mills Association (ISMA) said in a statement.

Key cane-growing districts of Maharashtra and Karnataka received up to 39% less-than-normal rainfall so far this monsoon season that started on June 1, according to weather department data. “Cane crop was facing moisture stress until the end of June. The rainfall in July was good, but weather models are suggesting lower rains in August and September, which could lead to lower yields,” said a Mumbai-based dealer with a global trade house. Sugarcane yields fell due to lower rainfall in June-July and brought down the production to 32.8 million tonnes from initial projections of 36.5 million tonnes.

Reuters was the first to report in December on the likely drop in production. The drop in this year’s output prompted India to cap exports at 6.1 million tons after exporting over 11 million tons a year ago.

India would either allow exports of 1 to 2 million tonnes in the next season or avoid exports altogether, as the government is keen to keep a lid on local prices, the dealer said.

The country’s sugar consumption in the next season could be around 27.5 million tonnes, ISMA said. ISMA said that the next season’s production estimate is based on the assumption that mills would divert 4.5 million tonnes of sugar for ethanol production.

However, traders said the diversion could be as high as 5.1 million tonnes, as mills in the northern state of Uttar Pradesh have increased their ethanol production capacity.