Sugar prices rise due to decrease in production and start of exports
18-Feb-2025 12:50 PM
The increase in sugar prices is primarily driven by two factors: a decrease in domestic sugar production and the government's approval for sugar exports. Here's a breakdown of the situation:
Decline in Production: Sugar production has fallen by approximately 12% this season compared to last year. As of February 15, 2025, the total production has reached 197.65 lakh tonnes, which is significantly lower than the 224.75 lakh tonnes produced during the same period in 2023-24. The decrease in production is also linked to a shortage of sugarcane, which has led to a reduction in the number of active sugar mills.
Early Closure of Mills: Many sugar mills, typically operating for 4 to 6 months, have had to close earlier than usual due to the sugarcane shortage. By mid-February 2025, 77 mills had shut down, compared to just 28 in the previous year. The closure of mills, especially in key sugar-producing states like Maharashtra and Karnataka, has further exacerbated the production shortfall.
Impact on Prices: The reduced supply has led to a 6.5% increase in the price of sugar in just one month (from Rs 3565 to Rs 3790 per quintal). This is also about a 12% rise compared to two months ago. The combination of lower production and the approval for sugar exports has created a market environment where prices are expected to remain high and possibly rise further.
Exports: The government has allowed the export of 10 lakh tonnes of sugar, which is likely to further reduce the domestic supply, contributing to the price hike. With a limited supply and increased global demand, the domestic sugar market is under pressure, and prices may remain elevated.
This situation is expected to continue unless there is a significant change in production or supply dynamics, particularly in sugarcane cultivation and mill operations.