Sugar Prices Surge as Production Falls Short; Ex-Factory Rates Jump by Up to Rs. 600 per Quintal in July

India's sugar prices have started rising sharply as lower-than-expected production and the government's earlier export decisions tighten domestic supplies. Ex-factory sugar prices have increased by as much as Rs. 600 per quintal during July, and industry participants expect the upward trend to continue as the country heads towards one of its lowest closing sugar stocks in decades.

At the end of June, ex-factory prices of S-grade sugar in Maharashtra and Karnataka were around Rs. 3,850 per quintal. They have now climbed to Rs. 4,400–4,450 per quintal. In northern states, including Uttar Pradesh, ex-factory prices of M-grade sugar have risen to Rs. 4,450–4,550 per quintal. The increase has already started reflecting in retail prices, with further hikes likely in the coming months.

Production Estimates Miss the Mark

According to industry sources, India's sugar production during the 2025-26 sugar season is estimated at around 27.9 million tonnes, while domestic consumption is expected to reach approximately 28.5 million tonnes. This marks the second consecutive year in which production has fallen short of consumption.

At the beginning of the season, industry associations had projected sugar production at about 30.9 million tonnes. However, weaker sugarcane yields significantly reduced output. Uttar Pradesh, India's largest sugar-producing state, witnessed a decline in production compared to the previous season, while Maharashtra, the second-largest producer, recorded a much smaller increase than initially expected.

By May 15, 2026, Uttar Pradesh's sugar production had declined to 8.97 million tonnes, the lowest level in nearly a decade. Maharashtra's total sugar production stood at 9.92 million tonnes.

Export Decisions Tightened Domestic Availability

Despite concerns over a weaker sugarcane crop, the government permitted the export of 1.5 million tonnes of sugar in December 2025. This was followed by an additional export quota of 0.5 million tonnes in February 2026.

Exports initially remained slow because international prices were unattractive. However, shipments accelerated after December, and around 0.8 million tonnes had been exported before the government suspended exports. Had the entire export quota been utilised, the domestic supply situation could have become even tighter.

In May 2026, the government imposed a ban on sugar exports until September 30, 2026.

Lower Stocks Push Prices Higher

Industry experts say the primary reason behind the current price rally is lower production. Reduced availability has been further aggravated by exports and higher diversion of sugar towards ethanol production, particularly in Maharashtra and Karnataka, resulting in lower inventories in these states.

Traditionally, ex-factory sugar prices in Maharashtra and Karnataka remained around Rs. 200 per quintal lower than prices in northern India. This season, however, the gap has narrowed to nearly Rs. 100 per quintal.

A leading sugar trader told Rural Voice that with inventories in western India tightening rapidly, sugar prices in Maharashtra and Karnataka could soon match those prevailing in northern states.

Closing Stock May Fall to Multi-Decade Low

The sugar season began on October 1, 2025, with an opening stock of about 4.7 million tonnes. Adding production of 27.9 million tonnes took total availability to approximately 32.6 million tonnes.

After meeting estimated domestic consumption of 28.5 million tonnes and exporting around 0.8 million tonnes, the country's closing stock on October 1, 2026, is projected at roughly 3.3 million tonnes. Industry estimates place the closing stock between 3.3 million and 3.5 million tonnes.

However, nearly one million tonnes of this stock typically remains with traders and stockists as trade inventory. This means the actual operational stock available with sugar mills could be significantly lower.

If crushing operations do not begin on schedule, sugar availability during October and November could become tight. Sugar mills generally commence crushing in early November, but this year's timeline will depend largely on the impact of El Niño on the monsoon and the resulting sugarcane crop.

Ethanol and Exports 

A weaker sugarcane crop would not only keep sugar prices elevated during the festive season but could also reduce the availability of sugar for ethanol production. Industry sources believe India's prospects for sugar exports next year are almost negligible unless sugarcane production recovers significantly.

With sugar prices historically remaining politically sensitive in India, the government faces a difficult balancing act between ensuring adequate domestic supplies, supporting ethanol blending targets and protecting consumers from inflation.