India sugar prices hit 18-month low, mills struggle to make cane payments

Sugar prices in India fell to their lowest level in 1-1/2 year due to ample supplies, making it difficult for mills to pay farmers the cane price as the crushing season gains momentum, industry officials told Reuters.

The fall in prices is prompting industry to demand immediate revision in minimum selling price (MSP) to limit losses, which will improve mills' margins and allow them to make timely cane payments to millions of cane growers.

"Sugar prices have fallen below the cost of production. This makes it difficult for mills to pay the revised cane price unless sugar prices rise," said B.B. Thombare, president of the West Indian Sugar Mills Association.

Wholesale sugar prices at Kolhapur in western state of Maharashtra have fallen nearly 8% in past four months to 33,675 rupees ($397.60) per ton, the lowest since June 2023.

The government should quickly raise the MSP above 40,000 rupees per ton to make cane crushing viable for sugar mills, Thombare said.

Indian trade bodies have been demanding an increase in the MSP, saying the government has raised the mandatory procurement price of sugarcane in recent years while the MSP has remained unchanged since 2019.

Sugar prices are falling as demand has decreased after the festival season, and new season supplies have begun, said Ashok Jain, president of the Bombay Sugar Merchants Association.

Indian mills have produced 2.79 million metric tons of sugar since the current season began on Oct. 1, down 35.4% year on year, a leading industry body said on Monday.

Mills in Maharashtra, which recently underwent state elections, sold more sugar than allocated, as mills controlled by politicians needed funds for election campaigns, said a Mumbai-based trader.

"The market was flooded with sugar in the past two months. This is why mills are now struggling to sell sugar, even at lower prices," the trader said.