Indian sugar production concerns drive local prices to 6-year high

Bajaj Hindusthan Sugar

05/09/2023 11:01

By Rajendra Jadhav
       MUMBAI, Sept 5 (Reuters) - Sugar prices in India have
jumped by more than 3% in a fortnight to their highest level in
six years, traders and industry officials said, as limited
rainfall in the country's key growing regions raised production
concerns for the upcoming season.
    This could add to food inflation and discourage New Delhi
from allowing sugar exports, supporting global prices  SBc1 
 LSUc1  which are near their highest in more than a decade.
    "Sugar mills are worried that production could fall sharply
in the new season because of drought. They are not willing to
sell at lower price," said Ashok Jain, president of the Bombay
Sugar Merchants Association.
    Higher prices will, however, improve margins for producers
such as Balrampur Chini  BACH.NS , Dwarikesh Sugar  DWAR.NS ,
Shree Renuka Sugars  SRES.NS  and Dalmia Bharat Sugar  DLMI.NS ,
helping them make payments on time to farmers, dealers said.
    Sugar output could fall by 3.3% to 31.7 million metric tons
in the new season starting from Oct. 1 as low rainfall hits cane
yields in the western state of Maharashtra and Karnataka in
southern India, which together account for more than half of
total Indian output, a leading trade body estimated. 
    Although sugar prices  SUG-MMZR-NCX  rose to 37,760 rupees
($454.80) per metric ton on Tuesday, their highest since Oct.
2017. Indian prices are nearly 38% lower than the global white
sugar benchmark  LSUc1 .
    The price rise will dissuade the Indian government from
allowing exports in the new season, Jain said.
    India allowed mills to export only 6.1 million metric tons
of sugar during the current season to Sept. 30, after letting
them sell a record 11.1 million metric tons last season.
    New Delhi is expected to ban mills from exporting sugar in
the season beginning October, halting shipments for the first
time in seven years, three government sources told Reuters last
month. 
    Sugar prices could rise further in the coming months as
stocks are falling, and the peak festive season is approaching,
said a Mumbai-based trader.  

 (Reporting by Rajendra Jadhav; Editing by Alexander Smith)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-68414378 ; Reuters
Messaging: rajendra.jadhav.thomsonreuters.com@reuters.net))