India braces for 8% sugar output dip as sugarcane crop suffers: Trade body

India's sugar production is likely to fall 8% to 33.7 million metric tons in the 2023/24 marketing year, which starts on Oct. 1, a leading trade body said on Tuesday, as lower rainfall in key producing states could dent yields.

Lower sugar production could lead the world's second-largest producer of sweetener to refrain from allocating export quotas and support global prices, that are trading near multi-year highs.

"Sugar production for 2023/24 without considering diversion towards ethanol has been estimated at around 33.7 million tons, against 36.6 tons estimated for 2022/23," the Indian Sugar Mills Association (ISMA) said in a statement.

In August, ISMA had forecast sugar production of 36.2 million tons in the current season.

The trade body did not provide an estimate for net sugar production after the diversion of sucrose for ethanol production, but it stated that the output would exceed the country's annual consumption of 27.85 million tons.

The diversion of sugar towards ethanol will be estimated only after the government declares the annual ethanol procurement price, the ISMA said.

Sugar mills diverted 4.1 million tons of sugar for ethanol production in the last marketing year and the similar allocation could bring down the new season's output to 29.6 million tons, said a Mumbai-based dealer with a global trade house.

"The impact of the dry weather in Maharashtra and Karnataka is quite evident now. There won't be enough surplus for exports, and the government is unlikely to allocate export quotas," the dealer said.

Government sources told Reuters in August that the South Asian country would ban mills from exporting sugar in the season beginning in October, halting shipments for the first time in seven years, as a lack of rain had cut cane yields.

In the last season that ended on Sept. 30, India allowed mills to export only 6.2 million metric tons of sugar, after permitting them to sell a record 11.1 million tonnes in 2021/22.

India earlier this month extended its restriction on sugar exports beyond October.

(Reporting by Rajendra Jadhav; Editing by Shweta Agarwal)