Indian sugar production concerns drive local prices to 6-year high

MUMBAI, Sept 5 (Reuters): Sugar prices in India have jumped by more than 3 per cent in a fortnight to their highest level in six years, traders and industry officials said, as limited rainfall in the country's key growing regions raised production concerns for the upcoming season.

This could add to food inflation and discourage New Delhi from allowing sugar exports, supporting global prices which are near their highest in more than a decade.

"Sugar mills are worried that production could fall sharply in the new season because of drought. They are not willing to sell at lower price," said Ashok Jain, president of the Bombay Sugar Merchants Association.

Higher prices will, however, improve margins for producers such as Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars and Dalmia Bharat Sugar, helping them make payments on time to farmers, dealers said.

Sugar output could fall by 3.3 per cent to 31.7 million metric tons in the new season starting from Oct. 1 as low rainfall hits cane yields in the western state of Maharashtra and Karnataka in southern India, which together account for more than half of total Indian output, a leading trade body estimated.

Although sugar prices rose to 37,760 rupees ($454.80) per metric ton on Tuesday, their highest since Oct. 2017. Indian prices are nearly 38 per cent lower than the global white sugar benchmark.