A Sweet Supply Shock
India, the world’s largest consumer of sugar, has seen prices jump almost 40% in just two months. By mid‑August, a kilogram that once cost 40‑45 rupees hit above 58 rupees in many markets, a sharp rise driven by supply anxiety ahead of the festival season.
The government’s response—importing 1 million tonnes for the first time in a decade—marks a drastic shift. Production for 2025‑26 is now pegged at 30.6 million tonnes, 11% below earlier forecasts of 34.3 million tonnes.
Key players point to a combination of factors: reduced monsoon rainfall, sugarcane diseases, and a significant diversion of cane to ethanol production. The export policy also played a role; 1.5 million tonnes were cleared for export at the start of the season, and an additional 0.5 million tonnes were approved in February. By May, nearly 0.8 million tonnes had already left the country before exports were halted.
Government and industry reactions
PhillipCapital’s Vikram Suryavanshi notes that “from exports to imports, the swing is a huge surprise” and stresses that India’s domestic sugar stocks are minimal. Atul Chaturvedi of Shree Renuka Sugars, the country’s largest refiner, argues that the imports will buffer consumption and that prices will stabilise once the shortfall is absorbed.
The Ministry of Agriculture has capped trader and wholesaler stock holdings at 400 tonnes for three months to curb hoarding, a traditional approach in times of scarcity. However, analysts contend that even after such measures, prices have continued to climb, suggesting a real supply squeeze rather than speculation.
Global context
El Niño has knocked rainfall in Thailand, while Brazil’s harvest has been hampered by heavy rain and ethanol diversion. Europe’s sugar beet crop also suffered from heatwaves. US forecasters predict global production will drop to 184.9 million tonnes this season, down from a record 186.1 million tonnes last year. London and New York futures surged to their highest levels since early 2025.
Looking ahead, a rise in domestic sugar prices could compel mills to reduce ethanol diversion, easing the strain on the market. Yet the current crisis underlines the need for more accurate crop estimates to avoid future disruptions.
