Sugar prices surge as lower output, ethanol diversion tighten supplies
India’s sugar prices have risen by around ₹300 per quintal in a month due to lower production, 2.9 million tonnes diverted for ethanol and 0.8 million tonnes exported. Despite adequate stocks, the government is considering stock limits, while higher sugar prices could discourage ethanol diversion.
Sugar prices have climbed rapidly across the country over the past month, with traders attributing the increase to lower production, higher diversion of sugar for ethanol manufacturing and exports.
In Uttar Pradesh, the country’s largest sugar-producing state, ex-mill sugar prices have risen to Rs 4,400-4,500 per quintal, while wholesale prices in Delhi are ruling at Rs 4,750-4,800 per quintal. Prices have increased by around Rs 300 per quintal in just one month, Telugu Times reported.
Market participants estimate that if the current trend continues, ex-mill prices could reach Rs 5,000-5,100 per quintal before the new sugarcane crushing season begins in October.
The sharp rise has prompted the Central Government to consider imposing stock limits on sugar mills and traders to contain prices. However, industry experts caution that while such restrictions may provide short-term relief to consumers, they could create unnecessary pressure across the sugar supply chain.
Industry associations have urged against panic buying, stating that India has adequate sugar stocks to meet domestic demand.
The price rally has been fuelled by a combination of lower output and reduced availability. Sugar production in the current season is expected to remain below 28 million tonnes. Around 2.9 million tonnes of sugar have been diverted for ethanol production, while another 0.8 million tonnes were exported earlier this year.
As a result, closing sugar stocks by October are projected at 3.5-3.75 million tonnes. Industry representatives say this inventory remains sufficient to meet domestic consumption, which averages around 2.3-2.4 million tonnes per month.
The higher sugar prices are also changing the economics for mills. With sugar sales in the open market becoming more lucrative, mills may prefer selling sugar instead of diverting it for ethanol production.
Industry experts say this could pose a challenge to the government’s ethanol blending programme if the price gap between sugar and ethanol continues to widen.
Stakeholders have also raised concerns over frequent changes in the government’s export policy, saying policy uncertainty makes it difficult for mills to plan production, inventory management and ethanol operations over the long term.
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Source : ChiniMandi
