Sugar Production Drops By 14% With Sharp Decline In Cane Availability
India's sugar industry is experiencing a significant downturn in production, with recent data revealing a concerning trend for investors and market watchers. As of February 28, 2025, sugar production has fallen by nearly 14% compared to the same period last year, according to latest figures released by the National Federation of Cooperative Sugar Factories (NFCSF).
Current Production Scenario
The state-wise crushing data for sugar season 2024-25 shows production at 220 lakh tonnes, down from 254.7 lakh tonnes recorded during the same period last year. Industry experts attribute this decline to three primary factors: higher diversion toward ethanol production, lower sugarcane availability, and reduced recovery levels.
Maharashtra, India's second-largest sugar producer, has been hit hardest with an 18% year-on-year decline in sugar production—the steepest drop among all states. Other major producing states have also recorded significant decreases, with Karnataka seeing a 16% reduction and Uttar Pradesh experiencing an 8% fall in production.
What's particularly notable is that these declines have occurred despite relatively stable or only slightly lower crushing volumes in some regions, indicating that increased ethanol diversion and lower sugar recovery rates are playing substantial roles in the reduced output.
Revised Production Estimates
Based on current trends, the NFCSF has revised its forecast for the 2024-25 season. Total sugar production is now estimated to reach 265 lakh tonnes, down from the previous estimate of 270 lakh tonnes. This represents a significant drop from the 319 lakh tonnes produced in the previous season.
The downward revision reflects ongoing challenges in the sector and suggests that the production shortfall may have broader implications for sugar prices, related industries, and potentially export capabilities.
Declining Sugarcane Crushing
As of the end of February 2025, overall sugarcane crushing has dropped 6.8% year-on-year, compared to a 4.5% decline in the same period last year. This accelerating downward trend is primarily due to reduced cane availability in Maharashtra and Karnataka.
The most recent fortnight data reveals an even more concerning pattern, with sequential cane availability declining sharply from 320 lakh tonnes to 210 lakh tonnes. The fortnight-wise breakdown by state shows:
- Uttar Pradesh: 10% decrease year-on-year to 86 lakh tonnes (from 95.9 lakh tonnes)
- Karnataka: Steepest fortnight decline of 57%
- Maharashtra: 43% fortnight decline
For the overall season, Karnataka has witnessed a 3.9% decline in cane availability, while Maharashtra has recorded a more substantial 12% drop. Uttar Pradesh has performed relatively better, showing flattish performance for the season thus far.
Early Closure of Sugar Mills
The reduced availability of sugarcane has led to a sharp increase in the number of mills concluding their crushing operations earlier than usual. The total number of mills closing operations jumped dramatically from 51 mills as of February 15, 2025, to 114 mills by February 28, 2025.
According to the NFCSF report, a total of 533 sugar mills participated in crushing during the current season. Of these, 186 mills had concluded operations by February 28, compared to just 72 mills closing by this date last year—a clear indication of the shortened crushing season due to limited cane availability.
Market Implications
The continued decline in sugar production could have several important implications for the market:
- Potential upward pressure on domestic sugar prices
- Reduced export potential, affecting India's position in the global sugar market
- Increased focus on ethanol production as mills divert more cane toward this alternative
- Possible impact on related industries, including food processing and beverage sectors
For investors monitoring the sugar sector, these developments signal a challenging period ahead, with possible opportunities in companies that have diversified into ethanol production or have strong operational efficiency despite the reduced cane availability.
The sugar industry's performance should be viewed alongside broader agricultural trends and government policies concerning ethanol blending and export regulations, as these factors will continue to shape the sector's trajectory in the coming months.
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