Summer Sugar Spike: Production Set to Fall by 10%, Prices Likely to Rise

Sugar production in India is predicted to plummet by 10% year on year in 2022-23, making sugar more expensive during the summer season, when demand for cold drinks and ice cream rises significantly. 

According to the National Federation of Co-operative Sugar Factories (NFCSF), India's sugar production in 2022-23 will be 325 lakh tonnes, up from 359.25 lakh tonnes the previous year.

According to the NFCSF, India produced 298.70 lakh tonnes of sugar during the current sugar production season as of March 31. According to the Indian Sugar Mills Association (ISMA), sugar production has reached 299.6 lakh tonnes as of March 31. NFCSF had forecasted 357 lakh tonnes of sugar production in 2022-23, which was later reduced to 334 lakh tonnes, followed by the latest estimate of 325 lakh tonnes.

ISMA's early estimate for the current fiscal year was 360 lakh tonnes in July, which was later lowered to 340 lakh tonnes. According to Centrum Institutional Research, the domestic sugar market has recently seen a surge in pricing, particularly in Uttar Pradesh. "We expect further price increases in the coming months as demand for sugar is expected to surge during the summer season," Centrum wrote in a research note.

Sugar prices are expected to grow in the next months, according to the industry. "Soft drink and ice cream manufacturers are expected to consume more sugar this year due to the severe summer," said Prakash Naiknavare, Managing Director, NFCSF, in a release. The main reasons for the drop in sugar production are irregular weather in Maharashtra and Karnataka, as well as increasing diversion of sugar for ethanol, which is combined with petrol to power automobiles.

The sugarcane crushing season in Maharashtra, which is going to end in 8-10 days, will be one and a half months shorter than the previous year. The state's output is expected to plummet by more than 23% to 105 lakh tonnes from 137 lakh tonnes the previous year. According to persons familiar with the situation, the Shapoorji Pallonji (SP) Group, the single largest shareholder of Tata Sons, is in talks to raise $1.75 billion by pledging the remaining half of its shareholding in the Tata Group's unlisted holding company.

If the visit goes ahead, it may involve a meeting with Prime Minister Narendra Modi. The UK government has offered to alter its January offer to Tata Steel UK, which was looking for a financial package to help it carry out its decarbonization plans for the Port Talbot plant. Tata Steel has asked the UK government for financial assistance in replacing two blast furnaces at its mill that are nearing the end of their operating lives.