India's sugar production faces significant challenges as El Niño-induced dryness threatens the harvest that begins next month. According to estimates from 11 traders, analysts and millers surveyed by Bloomberg, gross sugar production will range from 29 million tons to 31 million tons in the year through September 2027, compared to 31 million tons for the current season as forecasted by the Indian Sugar and Bio Energy Manufacturers Association. The strengthening El Niño is expected to hit harvests across Asia, contributing to a global deficit of roughly 260,000 tons, the International Sugar Organization warned in May. Monsoon rainfall, on which the Indian crop depends, is currently running about 15% below normal levels as of September 9, with expectations of less output in the 2026-27 season helping push raw-sugar futures up about 30% in New York this year.
The Indian government has announced a comprehensive monitoring system for sugar production starting October 2026. According to reports from The Hindu BusinessLine, Ashwini Srivastava, joint secretary in the Food Ministry, addressed the India Sugar & Bio-Energy Manufacturers' Association (ISMA) conference in New Delhi on Thursday. The government will track sugar production on a monthly basis to improve policymaking aimed at keeping prices stable during festival seasons. Mills have been asked to provide accurate monthly production and sugar sales data to ensure adequate supplies during the festival season. The ministry has also announced a fortnightly sugar allocation system from September, replacing the existing monthly quota mechanism, with mills required to sell at least 40% of their allocation in the first week and the balance in the following week.
Sugar prices have eased in recent days after hitting a record high last month, but remain nearly 20% higher than two months ago, according to Reuters. Speaking on Thursday, Srivastava said the government had asked sugar mills to ensure adequate supplies during the festival season and sell the sweetener at reasonable prices, warning that corrective measures would follow if needed. He emphasized that last month's price surge was driven not by a spurt in demand but by hoarding in anticipation of further price increases during the festival period. The government attributed the sharp spike in sugar prices to factors including a fall in domestic production due to weather-related damages, a demand spike ahead of the festive season, high global prices and hoarding by some producers. Sugar demand typically rises between August and November during major festivals such as Ganesh Chaturthi, Dussehra and Diwali, when consumption of traditional sweets and confectionery increases significantly.
India has approved permits for import of about 8 lakh tonnes out of the 10 lakh tonnes announced under the TRQ scheme, with the government receiving applications to import 0.8 million tonne of sugar under a duty-free quota of 1 MT so far. India, typically a sugar exporter, is importing the sweetener from Brazil for the first time in nearly a decade. Additionally, refiners who imported raw sugar at zero duty for re-export have sought approval for 2.65 lakh tonnes for domestic sales, with the government allowing two refiners 50,000 tonnes each during September 1-15. However, concerns have intensified over a strengthening El Niño, which is expected to weigh on harvests across Asia and has been linked to dryness in India. Yatin Wadhwana, a director at Gradient Commercial Pvt., noted that "the country may need to import sugar next year to build up its closing stocks," with expectations of less output in the 2026-27 season encouraging mills to produce more sugar rather than ethanol.
Raw sugar futures have reached their highest level since March 2025, with prices rising as much as 1.6% in New York and up almost 3% so far this week, according to Bloomberg. Strong Indian import demand and Brazilian supply disruptions are driving these gains, as Brazilian crushing is being disrupted by heavy rains in the Center-South region. Claudiu Covrig, lead analyst at Covrig Analytics, suggests that India may begin importing sugar as early as July next year to rebuild inventories after the current quota is filled, with inbound shipments potentially totaling 2-3 million tons. The government warns mills against unjustified price increases during festivals, stating there is no justification for any price rise during festivals. India is importing sugar from Brazil for the first time in nearly a decade, with refiners also seeking permission to sell domestically another 265,000 tons that was previously intended for re-export.
