A Tale of Two Forecasts
At the start of the 2025-26 sugar season, which runs from October to September, initial estimates from sugarcane-growing states projected a robust output of around 343 lakh metric tonnes (LMT). This optimistic forecast suggested a comfortable supply situation
for the country. However, as the season progressed, these numbers were drastically revised downwards. The latest government estimates now place production at around 306 LMT, a sharp decline of 11% from the initial projections. This significant gap between the forecast and the reality is what has caught markets and policymakers by surprise, turning a potential surplus into a carefully managed supply situation.
The Weather's Bitter Harvest
The primary culprit behind the production shortfall is adverse weather. Key sugar-producing states, particularly Maharashtra and Karnataka, faced erratic monsoon patterns. These states, which are crucial to India's total sugar output, experienced periods of excess rainfall leading to waterlogging in some areas, followed by prolonged dry spells. This climatic volatility directly impacted the sugarcane crop in several ways. It not only stunted the growth of the cane but also reduced its sucrose content, meaning that mills were able to extract less sugar from each tonne of cane they crushed. This lower recovery rate was a critical factor in why the final output numbers fell so dramatically.
Crop Diseases Compound the Problem
Beyond the weather, crop diseases also played a significant role in diminishing yields. In major cane-growing regions, farmers battled outbreaks of Red Rot, a fungal disease that damages the cane from within, and pests like the Top Borer. These afflictions further compromise the quality of the sugarcane and reduce its sugar content, exacerbating the impact of poor weather. The spread of these diseases, particularly in dominant sugarcane varieties, meant that even a visually healthy crop could yield disappointing results at the mill, contributing to the unexpected decline in production.
The Ethanol Diversion Factor
Another crucial piece of the puzzle is India's strategic push towards ethanol blending in petrol. To reduce its reliance on imported oil and support farmers, the government has encouraged the diversion of sugarcane juice and molasses for ethanol production. While the government has stated that the share of sugar diverted to ethanol has actually declined to around 9% in the 2025-26 season from 12% a few years prior, it still represents a significant volume. In a year when production is already under stress from weather and disease, diverting several million tonnes of potential sugar to fuel has a noticeable impact on the total volume available for consumption.
Impact on Prices and Exports
The combination of lower production and steady domestic demand has inevitably led to consequences for both prices and trade. With domestic supplies tighter than anticipated, retail sugar prices have seen a sharp increase in recent months. In response, the government has taken several steps to ensure availability and control costs, including banning sugar exports in May 2026 to preserve stocks for the home market. Authorities have also announced measures like imposing stock limits on dealers and allowing for the duty-free import of raw sugar to augment domestic supply ahead of the festive season.
