Sugar Prices To Remain Firm Despite Curb On Diversion
According to India Ratings, sugar situation is still likely to remain tight. Lower-than-expected production, exports, and ethanol diversion are likely to have reduced opening sugar inventory for sugar season 2027 to below 4 million tonnes, a decadal low and well below the normative requirement of around 5.5 million tonnes
Chennai: Despite the recent restriction of sugar diversion for ethanol production, sugar prices are likely to remain firm this year due to low levels of inventory and smaller production.
The government has directed oil marketing companies to exclude ethanol produced from sugarcane juice, sugar syrup, and B-heavy molasses in their procurement tenders.
According to India Ratings, sugar situation is still likely to remain tight. Lower-than-expected production, exports, and ethanol diversion are likely to have reduced opening sugar inventory for sugar season 2027 to below 4 million tonnes, a decadal low and well below the normative requirement of around 5.5 million tonnes.
Zero sugar diversion could release around 3 million tonnes of additional sugar, equivalent to 10%-12% of annual domestic consumption.
“However, the supply situation is likely to remain tight. While acreage is broadly stable at 5.86 million hectares against 5.89 million hectares last year, lower yields, particularly in Maharashtra and Karnataka, could reduce gross production to around 28 million tonnes against 31 million tonnes last year,” it said.
Net production could consequently be around or even below the estimated consumption of around 28.5 million tonnes, preventing any inventory rebuild. Unless production materially exceeds current estimates, imports could be required to meet domestic demand and rebuild stocks ahead of 2028.
The 1 million tonne import quota up to October 2026 announced in August 2026 has seen limited traction, following the correction in domestic sugar prices and strengthening global prices.
Raw sugar prices have risen to around 20 cents/pound from 15-15.5 cents/pound in July 2026, while white sugar prices are around $550/metric tonne versus $465/mt. Meanwhile, domestic prices have moderated to around Rs 48/kg in the first half of October 2026 from around Rs 56/kg in the second half of August following government measures, and the onset of the crushing season is likely to drive a seasonal moderation in domestic sugar prices over the next few months.
As a result, the combination of elevated global prices and freight costs and rupee depreciation makes imports unattractive at current domestic prices.