India faces second year of sugar deficit as mills close early

Early mill closures reduce stockpiles, supporting domestic sugar prices

India's sugar production is set to fall below consumption for a second straight year, as lower cane yields force mills to close faster than usual, trade officials told Reuters on Thursday.

Lower output, coupled with rising exports, is likely to reduce domestic stockpiles and support local prices, which had been under pressure due to surplus supplies.

"Sugar production is unlikely to exceed 28 million metric tons this season," said the India head of a global trade house based in Mumbai.

"Most sugar mills have already closed, with only a few still operational, which are expected to close in the coming weeks."

At the start of the season, industry bodies including the Indian Sugar & Bio-Energy Manufacturers Association (ISMA) and the National Federation of Cooperative Sugar Factories Ltd (NFCSF) had forecast production of around 31 million tons, against local demand of 28.5 to 29 million tons.

However, lower cane yields due to excessive rainfall had forced 467 of the 541 mills that began operations this year to shut by the end of March, according to NFCSF data. Last year, 420 mills had closed by the same time.

Indian sugar mills produced 27.12 million tons of sugar in the first half of the 2025/26 marketing year ending in Sept 2026, up 9 percent from a year earlier, NFCSF data showed.

Almost all mills in Maharashtra and Karnataka, India's largest and third-largest sugar-producing states, have shut earlier than expected, said a New Delhi-based dealer with a global trade house.

"The government allowed exports hoping for a large surplus. But now it is certain that production will not even meet domestic consumption," said the dealer.

In February, India raised its sugar export quota to 2 million tons, adding 500,000 tons to the 1.5 million tons approved earlier.

After last year's drop in production, the industry was counting on this season to increase stocks and export surplus, but lower output will reduce opening stocks for the next season, said an official with a leading industry body, who declined to be named.

"This season began with opening stocks of 5 million tons, but the next season will start with less than 4 million tons. This should help firm up sugar prices," the official said.