Poor Crop and Poor Prices Are Affecting Factors

India’s sugar production is expected to drop by 1.8 million tonnes, totaling 32.5 million tonnes during the current crushing season, which runs from October 2024 to September 2025. Weaker sugarcane crops and lower recovery rates in Maharashtra have caused the decline while Uttar Pradesh leads in production. However, even in Uttar Pradesh, the sugarcane crop is not faring well, which may shorten the crushing season this year.

For the current season, the central government has set the Fair and Remunerative Price (FRP) of sugarcane approximately 0.408 USD per kg, with a sugar recovery rate of 10,25%. According to industry sources, sugarcane crushing in Maharashtra will begin on November 15. While the Uttar Pradesh will start in the first week of November. Due to the poor crop in Maharashtra, the crushing season is likely to end after 115-120 days. Which is significantly shorter than the typical 180-day period.

Lower Production and Shortened Crushing Season

The sugarcane crop reduction and the shortened crushing season will hurt the financial health of sugar mills. In addition, the increased crushing capacity of sugar mills is contributing to the shorter season. Last year, India produced 34.2 million tonnes of sugar, with 2.4 million tonnes diverted for ethanol production. This year, sugar production is expected to be 32.5 million tonnes, with 4 million tonnes used for ethanol, leaving 28.5 million tonnes for the market, down from 31.9 million tonnes in the previous season.

At the beginning of the current season, the sugar stock was 8.023 million tonnes, bringing total availability to 36.523 million tonnes. With annual consumption estimated at 29.5 million tonnes, there will be an ending stock of 5.523 million tonnes. Ideally, there should be a stock equivalent to three months of consumption, or around 7.4 million tonnes, which suggests that sugar exports from India are unlikely this season.

Export Restrictions and Price Outlook

The Indian government restricted sugar exports and did not release any export quotas last season. Based on current production and stock estimates, the government may continue the ban on sugar exports. And the export restrictions could remain in place beyond October 31, 2024. Currently, white sugar from India is priced at 0.54 USD per kg, while raw sugar is priced at 0.51 USD per kg. In the domestic market, the price of M-grade sugar in Uttar Pradesh and Tamil Nadu is 0.46 USD per kg and 0.43 USD per kg in Maharashtra and Karnataka.

Demands to Raise Minimum Selling Price of Sugar

To address the rising production costs, the National Cooperative Sugar Factory Federation (NFCSF) is calling on the government to increase the minimum selling price (MSP) of sugar to 0,504 USD per kg. The Federation argues that mills are struggling to operate profitably against increasing costs for sugarcane, transportation, and wages. While the FRP of sugarcane has been raised three times in recent years, the MSP of sugar has remained unchanged at 0,372 USD per kg since 2019.

Jaiprakash Dandegaonkar, Director of NFCSF, emphasized that the sugar industry is facing low profitability and working capital issues. He added that the government’s delay in revising the MSP of sugar could lead to more financial difficulties for sugar mills. The federation is seeking an increase in sugar’s minimum price to USD 0.50 USD per kg to help mills sustain operations.

A Difficult Season Ahead for Sugar Mills

The sugar industry is under pressure due to rising input costs and stagnant sugar prices. The Union Cabinet assured that it will soon make a decision on increasing the MSP. Harshvardhan Patil, Chairman of NFCSF, mentioned that they have created a 10-year road map. Intention is to address the challenges facing cooperative sugar mills, including adjustments to FRP and MSP. The sugar industry is hopeful that the government will revise the sugar MSP soon. To improve liquidity and ensure timely payments to farmers.

Conclusion: Uncertainty Looms Over the Sugar Market

With sugar production expected to fall by 1.8 million tonnes and exports remaining restricted, the domestic sugar industry faces a challenging season. The industry’s future depends on the government’s decision to raise the MSP and provide relief to mills dealing with increased production costs.





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