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Concerns over delayed and below-normal rainfall could put pressure on India’s sugar production this season, particularly in major sugarcane-producing states, although continued policy support for ethanol is expected to sustain long-term growth prospects for the sector.
According to Prashant Biyani, Vice President – Institutional Equity at Elara Securities, the current rainfall pattern and delay in monsoon progress could affect sugar production if conditions continue in the coming months, Moneycontrol reported.
He said Maharashtra and Karnataka remain the most vulnerable states during weak monsoon and El Niño years because sugarcane cultivation in these regions depends heavily on rainfall. Uttar Pradesh, supported by its extensive canal irrigation network, is comparatively better positioned but could also experience some impact if rainfall remains below normal.
Sugarcane requires sufficient water availability during key monsoon months to maintain crop growth and productivity.
Biyani noted that for Maharashtra and Karnataka, rainfall during June, July, August and September will remain critical for determining sugarcane output.
According to Skymet Weather Services, after an early advance along the western coast, the southwest monsoon has remained stalled since June 8, increasing concerns over rainfall distribution across major agricultural regions.
Rainfall deficiency across India has already reached 32%, and weather forecasts suggest the shortfall could widen to 40% in the coming weeks if weather conditions do not improve.
Despite weather concerns and softer crude oil prices, the broader outlook for the sugar industry continues to remain favourable due to policy support for ethanol.
Government measures promoting ethanol blending and recent approval for flex-fuel engines capable of operating on 100% ethanol are expected to support future growth opportunities for the sector.
Biyani expects sugar prices to remain firm this year due to lower production levels. However, he indicated that sugar stocks may witness some pressure as the recent rally linked to higher crude oil prices begins to ease.
He added that the sugar sector is likely to remain range-bound because government intervention generally limits extreme price movements.
According to him, during years of lower sugarcane output, authorities may reduce ethanol diversion to prioritise sugar production and maintain balance in the domestic market.