Indian Sugar Production Faces Deficit Amid Weather Disruptions and Water Shortages

Indian consumers are likely to face higher sugar prices over the next year as production is affected by weather disruptions and water shortages. Industry stakeholders recently presented these projections to the Inflation Analysis Division of the Reserve Bank of India (RBI).

According to Dilip Patil, regional director-west at the Indian Federation of Green Energy, sugar production could drop by 15 percent to 27 million tonnes during the current season spanning October 2026 to September 2027. He attributed the decline to deficient monsoons and El Niño-related weather conditions, noting that the impact is visible primarily in Maharashtra and North Karnataka. In contrast, Uttar Pradesh remains relatively better protected due to canal and tube-well irrigation.

Stakeholders broadly project current season production between 27 million and 29 million tonnes, while global analysts peg output between 28.4 million and 29.5 million tonnes. However, deficit rains and water uncertainty are expected to impact planting for the subsequent season as well. Ajit Chougule, Executive Director of the West Indian Sugar Mills Association, stated that drought conditions are severe in the Marathwada region of central Maharashtra, western Maharashtra districts like Sangli and Kolhapur, and neighboring Karnataka.

Abhijit Ghorpade of Ghorpade Agrovet noted that fresh sugarcane planting for the next season will suffer due to confusion over water availability for irrigation. Rahil Shaikh, founder and managing director of MEIR Commodities, added that growers may shift to alternative crops such as maize and soybeans, while ratoon crops are also failing due to drought conditions.

Additionally, Ghorpade pointed out that farmers around Kolhapur have started selling cane to jaggery manufacturing units, which are offering better prices compared to sugar factories. A likely decline in the recovery rate and increased diversion to jaggery will further impact sugarcane output.

With domestic consumption expected to reach 28.5 million to 29 million tonnes against production estimates of 26 million to 27 million tonnes, a structural production deficit of 1.5 million to 2.5 million tonnes is anticipated. As of October 27, 98 mills have begun crushing operations in Maharashtra, crushing about 5.5 million tonnes of cane with a recovery rate of 7.27 percent.

Data from the Department of Consumer Affairs indicates that average retail sugar prices currently stand at ₹58.87 a kg, ranging between ₹45 and ₹76 a kg nationwide, with ex-mill prices quoted above ₹5,000 a quintal. Industry sources suggest that retail prices are unlikely to drop below ₹50 a kg this season unless supplies are augmented through imports.

Globally, March raw sugar futures are quoted at 19.42 cents a pound, while March white sugar futures rule at $538.70 a tonne. Global sugar prices are up about 30 percent year-to-date.

While near-term sugar availability remains comfortable with an opening stock of 3 million tonnes covering festival demand, stakeholders warn that the lack of buffer stock in the 2026-27 season could trigger price spikes if early crushing is disrupted. Furthermore, tighter sugar availability is expected to keep sugar diversion for ethanol minimal.

"The projected deficit in domestic sugar production highlights the critical dependency of agro-based industries on consistent water resources and weather patterns. For businesses operating in the agricultural and commodities value chain, supply side vulnerabilities directly translate into margin pressures and pricing volatility. Stakeholders must closely monitor input costs, inventory buffers, and regulatory import policies to navigate potential market shifts over the coming year." — Dr. Shishir Gupta, Founder & CEO, StartupLanes