Sugar’s Sweetness Wanes as India Faces 8% Dip in Production

The Indian sugar industry, often a source of sweet success, is now grappling with the bitter news of an anticipated 8% decline in sugar production for the 2023/24 marketing year, commencing on October 1. This revelation, delivered by the eminent Indian Sugar Mills Association (ISMA), underscores the precarious situation as lower rainfall in key sugar-producing regions looms large, posing a threat to yield.

Such a dip in sugar production could have global implications, as India, the world’s second-largest sugar producer, might be compelled to withhold export allocations to buoy global prices, which currently hover near multi-year peaks.ISMA articulated, “Sugar production for 2023/24 without considering diversion towards ethanol has been estimated at around 33,7 million tons, against 36.6 tons estimated for 2022/23.” This significant downgrade follows ISMA’s earlier forecast in August, wherein it had anticipated sugar production of 36,2 million tons for the ongoing season.

Notably, ISMA refrained from presenting an estimate for net sugar production after considering the diversion of sucrose for ethanol production. However, they affirmed that the total output would still outstrip the nation’s annual consumption of 27,85 million tons. The precise diversion of sugar toward ethanol hinges on the government’s declaration of the annual ethanol procurement price, a detail that ISMA pointedly underlined.

A stark realization is emerging in the industry – the adverse effects of dry weather conditions in regions like Maharashtra and Karnataka are palpable. The repercussions include an anticipated insufficiency for exports, with the government unlikely to assign export quotas, as articulated by a Mumbai-based dealer representing a global trade house.

This phenomenon emerges in light of a government decision, reported in August by Reuters, whereby India, in the upcoming season starting in October, would ban sugar mills from embarking on exports. Such a move marks a significant development, as it would halt sugar shipments for the first time in seven years, a consequence of reduced cane yields resulting from inadequate rainfall.

Recall that during the last season, concluding on September 30, India permitted mills to export only 6,2 million metric tons of sugar. This was a notable step back from their previous record-breaking allowance of 11,1 million metric tons in the 2021/22 season.

Adding to the complexity, India has recently extended its restriction on sugar exports beyond the month of October, casting a veil of uncertainty over the nation’s sugar sector.

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