India’s Sugar Production Takes a Hit: What It Means for Prices and Supply

India’s Sugar Output Faces Major Setback: Will Prices Rise?

ISMA Revises Sugar Production Forecast Downward

In a significant revision, the Indian Sugar Mills Association (ISMA) has adjusted its 2024-25 sugar production estimate to 27.27 million tonnes (MT)—a sharp decline from the 31.96 MT produced last season. This 15% drop has raised concerns about potential supply constraints and their impact on domestic sugar prices.

According to ISMA, the primary reasons for the production decline include:

• Red rot infestation affecting sugarcane crops in Uttar Pradesh.

• Varietal replacement, which has impacted yield potential.

• Early flowering in Maharashtra and Karnataka, reducing the overall sugarcane output.

• Excessive rainfall, which affected sunlight exposure, further impacting yields.

With these factors in play, the sugar market could witness tightening supplies, pushing prices higher in the near future.

Current Sugar Production Status

As of January 31, 2025, total sugar production stood at 16.5 MT, significantly lower than the 18.72 MT recorded during the same period last year. The shortfall is already raising concerns about meeting domestic demand, which ISMA projects at 28 MT for the entire season.

Adding to the supply strain, the government has approved 1 MT of sugar exports, despite the lower production estimates. This move could further reduce available stock in the domestic market, leading to possible price surges.

Ethanol Diversion to Reduce Sugar Availability

Another key factor impacting sugar supply is ethanol diversion. The government has continued its focus on ethanol blending, with ISMA estimating that 3.75 MT of sugar will be diverted for ethanol production. This initiative aligns with India’s energy transition goals, but it also means less sugar will be available for domestic consumption, contributing to potential price hikes.

Impact on Prices and Market Trends

With production estimates lowered and ethanol diversion further tightening supply, sugar prices are likely to remain firm or even increase in the coming months. Several factors could contribute to market fluctuations:

✅ Lower stock availability may drive domestic sugar prices higher.
✅ Increased ethanol diversion reduces sugar availability in the market.
✅ Export approvals add additional supply pressure.
✅ Global sugar market trends could influence pricing dynamics.

The ISMA report suggests that by September 30, 2025, India’s closing sugar stock will be 6.25 MT, indicating that reserves will be at their lowest levels in recent years.

Government Policies and Industry Response

The government's recent approval of sugar exports despite lower production has raised eyebrows. While exports may benefit sugar mills financially, they could also exacerbate domestic supply issues. Policymakers will need to closely monitor the situation and may consider restricting further exports if domestic prices begin to surge uncontrollably.

The sugar industry is also likely to focus on productivity improvements and disease-resistant crop varieties to mitigate the impact of red rot and climatic challenges in future seasons.

Final Thoughts: Should Consumers Expect Higher Sugar Prices?

Given the current supply constraints, ethanol diversion, and export approvals, sugar prices are expected to remain under upward pressure in the near term. Consumers and businesses relying on sugar-based products should prepare for possible price increases, while market participants will closely watch future production updates and policy shifts.

In the coming months, any further production shortfalls or policy adjustments could significantly influence market sentiment, making India’s sugar industry a key sector to watch in 2025.