India sugar prices hit record high on tight supplies, festival demand

Indian sugar prices hit a record high as tight supplies and rising festival demand fuel gains, raising inflation concerns and boosting sugar mill margins

Indian sugar prices have jumped 10% over the past month to a record high and are expected to remain ​elevated for at least the next three months as ​supplies tighten and festival demand gathers pace, traders and industry officials told ‌Reuters.

Rising prices will add to retail inflation that breached the central bank's target for the first time in 17 months in June, and prompt New Delhi to take further measures to curb prices after banning exports and imposing stock limits last month.

The rally is also expected to boost margins for sugar producers such as Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars and Dalmia Bharat Sugar, dealers said.

 

Wholesale sugar prices in Kolhapur, a key trading hub in the western state of Maharashtra, have risen nearly 10.2% over the past ‌month to a record 4,716 Indian rupees per 100 kg.

"Demand has picked up ahead of the festival season, but mills are holding back supplies and releasing stocks gradually, expecting prices to climb further," said Ashok Jain, president of the Bombay Sugar Merchants Association.

India's sugar demand typically rises from August to November as the country celebrates major festivals such as Ganesh Chaturthi, Dussehra and Diwali, when consumption of ​traditional sweets and confectionery increases.

Sugar inventories held by mills at the start of the new ‌season on October 1 are expected to fall to about 3.5 million tons, the lowest level in more than three decades, after production in the ​current ‌season fell short of annual consumption and mills exported about 800,000 tons of sugar.

"Supplies will ‌improve only after mills begin crushing the new-season crop in November. Until then, the market will have to rely on this season's production, which was ‌insufficient," ​said a Mumbai-based ​trader.

Bulk consumers such as biscuit and confectionery makers and soft drink and beverage companies are building inventories ahead of the festival season, buying sugar ‌despite elevated prices ​to avoid shortages during the peak demand period, he said.