(Jan 14): Sugar production in India, the second-biggest grower, is trailing expectations as the toll of disease and last year’s dry weather curbs the supply reaching mills.

Output in the 2024-25 year that ends in September may total about 27.6 million tons after diversions to make ethanol, according to the mean of six estimates in a Bloomberg survey of traders and millers. That would be about 4.4 million tons below a year earlier, and compares with 29.3 million tons estimated in November by the Indian Sugar and Bio-energy Manufacturers Association.

“The cane crushing is almost midway and looking at the pace I don’t think sugar production is going to meet expectations,” said Ravi Gupta, an executive director with Shree Renuka Sugars Ltd. “The red rot disease in Uttar Pradesh and dry weather in Maharashtra have affected sugar cane yields and that’s a concern for mills.”

The survey’s average estimate would put this year’s production at the lowest since 2019-20 and trailing domestic consumption. That risks India extending export restrictions for another season, tightening global supplies and potentially reviving New York futures.

Ayaz Akhtar, 43, a farmer from top-grower state Uttar Pradesh, has reduced the acreage under cane as the red rot disease, which is spread by bugs and kills cane plants, cut yields. Now Akhtar is growing potatoes. “We will gradually stop producing sugar cane because there seems to be no solution to the disease,” he said.

The unexpected drop in output and Prime Minister Narendra Modi’s plan to boost ethanol blending may prompt authorities to extend the current export restrictions, quashing industry’s hopes of selling as much as two million tons overseas this season.

Poor output in 2022-2023 spurred India to begin limiting sugar exports via a quota system, restricting sales to six million tons. No allowance was announced last year, and authorities have yet to allocate any exports for the current season. The government’s plan to increase the share of ethanol in gasoline blends to 20% by 2026 to reduce emissions is one of the reasons why the curbs are still in place.

A spokesperson for India’s food and commerce ministries did not respond to a request for comment.

“The government’s priority is and should be to encourage production of more ethanol, thus leaving no surplus sugar for exports in the current season,” said Harshveer Singh Soni, a director with GreenLeaf, a New Delhi-based broker and consultant.

India’s sugar cane output will likely fall to 439.9 million tons in 2024-25, down from 453.2 million tons a year earlier, the farm ministry said in November. It did not forecast sugar production.

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