Rising sugar prices signal market caution, allay fear of any supply shortage : Editorial by Uppal Shah
Indian sugar prices have risen by ₹200–250 per quintal over the past month as markets factor in monsoon deficiencies and potential Super El Niño risks to the 2026–27 sugarcane crop. With balanced carry-forward stocks and uncertainty over production, industry expects prices to remain firm until the new crushing season begins.
Domestic sugar prices have been firming over the past month, reflecting concerns about the sugar production outlook for the 2026-27 sugar season, beginning in October.
In North India, ex-mill M-grade sugar prices in Muzaffarnagar have climbed to Rs 4,270–4,370 per quintal from around ₹4,050 per quintal just a month ago.
Similarly, in western India, the ex-mill S-grade sugar prices in Kolhapur have strengthened to Rs 4,040– 4,100 per quintal, after quoting at around Rs 3,800 per quintal in the first week of June.
I feel that this rise of nearly Rs 200–250 per quintal within a month indicates that the market is beginning to factor in production risks for the upcoming season. The primary trigger behind this rally is monsoon woes and its impact on the standing crop.
The Southwest Monsoon, which plays a crucial role in determining sugarcane growth and sucrose accumulation, delivered below-normal rainfall in June. The water storage in reservoirs has also depleted.
While the monsoon has gathered some momentum, and good rainfall is reported from several agriculture-dominant states, the initial deficiency and the looming threat of Super El Niño might have already impacted the sentiment of traders, millers and bulk consumers to reassess production expectations for the 2026-27 sugar season.
Sugarcane, unlike any other agri crop, is a long-duration crop whose sugar recovery depends on rainfall distribution, temperature and moisture availability during key growth stages.
Any prolonged moisture stress can adversely affect cane yield and sugar recovery, directly impacting sugar output. At this stage, it is premature to predict the final production figure, but the market is clearly attaching a weather premium to sugar prices.
A closer look at the balance sheet for the ongoing 2025-26 sugar season is crucial here, as it would indicate the carry-forward sugar stocks required for the initial few months, till the new sugar hits the market.
India entered the current season of 2025-26 with an opening stock of about 5 MMT. Sugar production is estimated at around 28.1 MMT, taking the total sugar availability to about 33.1 MMT.
Against this, the domestic sugar consumption is estimated at around 28.2 MMT. Sugar exports before they were banned in May this year were about 6 LMT (0.6 MMT), taking the total sugar offtake to about 28.8 MMT.
This leaves a closing stock of nearly 4.3 MMT, almost in the range of last year’s closing inventory. This closing sugar stock is sufficient to meet the normative sugar consumption demand of the initial months of the new season.
Commodity markets are principally forward-looking and highly sentiment-sensitive. Prices rarely reflect the current dynamics; they also reflect expectations about future demand and supply.
Weather forecasts, production estimates, government policy and global market trends often influence prices months before the actual crop reaches the market. The recent strengthening in domestic sugar prices is a classic example of this phenomenon.
Internationally too, sugar prices have strengthened from weak positions. Experts said the sentiments are boosted by Indian sugar market weakness and the impact of super El Niño in other top sugar producing nations like Brazil, Thailand, etc.
I feel another contributing factor to the increase in sugar prices is the absence of surplus inventories. Unlike years when India carried higher sugar stocks that weighed down on prices, the present season is expected to conclude with balanced inventories. Such a scenario also prevents aggressive selling by sugar mills and naturally supports market prices.
For sugar mills, the recent price improvement will improve their cash liquidity, which is essential to make sugarcane price payments to the farmers and repay bank loans on time.
In fact, in an interview, Atul Chaturvedi, Director, Shree Renuka Sugar, had said that the sugar prices should be remunerative for the mills and it is high time the prices reflect the cost of production. His statement bears testament to the fact that most sugar mills in the country are running losses due to the widening gap between the MSP of sugar and cane FRP. A stable and remunerative price environment is far more beneficial than sharp spikes driven by uncertainty.
I totally concur with our panellists at the Sugar and Ethanol, BioEnergy India Conference (SEIC). At the panel discussion on ‘Chini: Mandi or Tezi’, a growing perception was that sugar prices will remain bullish till the new season. The discussions drew a conclusion that there would be some weather constraints and sugar prices will remain bullish in the range of Rs. 4000 to 4200 per quintal.
Going forward, I feel sugar prices will depend largely on the progress of the monsoon during July and August, and its performance over key sugarcane growing States like Maharashtra, Karnataka and Uttar Pradesh. If rainfall remains erratic during the critical crop development period, expectations of lower sugar output could continue to keep prices firm.
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Source : ChiniMandi
