Last week, I discussed the anticipated decline in sugar production for the current season.
AgriMandi Live, ChiniMandi’s research wing, forecasts total sugar output at 33.9 MMT, with an estimated 3.7 MMT being diverted for ethanol production, resulting in a net sugar availability of roughly 30.2 MMT.
When factoring in a carry-forward stock from the previous season of 5.0 MMT, the overall expected sugar availability in the country reaches 35.2 MMT.
I emphasised the factors at play for this reduced sugar production. The excessive rainfall during the early growth stages of sugarcane led to premature flowering, especially in Maharashtra and Karnataka. Historically, early flowering results in lower recovery rates of sugar, and this year has followed that trend.
I also noted that domestic sugar prices have stabilised despite the decreased production levels.
Currently, M-grade sugar is priced at ₹4040–₹4100 per quintal in Muzaffarnagar (Uttar Pradesh), up from ₹3980–₹4100 per quintal last week. Meanwhile, S-grade sugar in Kolhapur (Maharashtra) is selling for ₹3700–₹3750 per quintal, reflecting an increase of around ₹100 per quintal compared to last week.
If AgriMandi’s estimates for 2026 hold, policymakers will face another balancing act between tightening regulations and easing measures to improve liquidity for sugar mills. Their options are limited due to existing export commitments and the necessity of diverting some sugar into ethanol production.
Government Options
The primary concern for the Government remains ensuring adequate domestic sugar stocks to meet annual consumption needs.
AgriMandi projects total sugar consumption at 28.5 MT; thus, most available stocks will be directed toward domestic use as has been customary.
This allocation leaves approximately 6.7 MMT available within the country. The Government has permitted exports totalling 1.5 LMT to help mills realise revenue from their products.
Trade sources indicate that around 300 KMT of sugar has already been contracted for export; of this amount, between 100–120 KMT has reportedly been shipped so far.
Should industry exports reach the full quota of 1.5 MMT this season, carry-forward stocks will shrink to just 5.2 MMT, barely sufficient for normative requirements in the initial three months of the new season.
This clearly indicates that any sugar export demand for further exports beyond 1.5 LMT will pose challenges this season.
The second priority for the Government is fulfilling commitments related to ethanol production; hence, the planned diversion of 3.7 LMT towards ethanol is sacrosanct.
The Government has given a monthly quota for sugar sales totalling 44.5 LMT (January: 22 LMT; February: 22.5 LMT), slightly below last year’s allocation of 45 LMT during these months (22.5 LMT each).
A higher portion was released this month compared to last month, due to Ramadan commencing mid-February.
With eight months remaining in the season and weather conditions playing a critical role ahead, harsh summers typically increase sugar consumption through higher demand for ice creams and cold drinks, while monsoon months show a downturn in overall sugar consumption. It remains uncertain how trends will unfold.
ISMA’s in its latest report on seasonal progress, has said that the country has produced about 195 LMT of sugar so far, an increase of 18.4% compared to last year during this period. The association is set to release its Third Advance Estimate in February, which should provide additional insights.
Typically, sugarcane crushing operations continue into March or April; however, it is expected that mills will begin closure by late February this year, which may lead to decreased overall production levels. Looking at the developments, it appears that the market is likely to stay bullish.
