El Niño, the Pacific Ocean weather phenomenon, is set to reduce sugar production in India during the upcoming season, with the International Sugar Organization warning of a global deficit of about 260,000 tonnes. India is the world's second-largest sugar producer.
The Indian Sugar and Bio-energy Manufacturers Association projects gross sugar production of between 29 and 31 million tonnes annually by September 2027, while output for the current season is estimated at 31 million tonnes.
Monsoon rainfall over India's sugarcane-growing regions is currently running about 15% below normal levels, adding pressure to a crop that underpins the country's sugar output. Reduced output expectations for the next harvest have already pushed raw sugar futures up by around 30% this year on the New York commodity exchange, according to Bloomberg.
El Niño and the monsoon
El Niño is a naturally occurring climate pattern caused by the warming of surface waters in the central and eastern Pacific Ocean. It can disrupt monsoon rainfall across South and Southeast Asia, reducing yields of water-dependent crops such as sugarcane. India depends heavily on its seasonal monsoon to irrigate cane fields, so weaker rains tend to translate into lower harvests the following year.
India's response
India, the world's largest consumer of sugar, permitted mills and refineries last month to import duty-free raw sugar in an effort to control rising domestic prices. The government has also set limits on the quantities of sugar that traders and large consumers are allowed to stockpile.
Yatin Wadhwana, director of the advisory firm Gradient Commercial, said the country might need to import sugar next year to build up its reserves. He added that current prices were likely to encourage factories to produce more sugar rather than divert sugarcane to ethanol production.
Global market impact
The International Sugar Organization is the intergovernmental body that tracks global sugar production and trade. Its forecast of a 260,000-tonne shortfall reflects the combined effect of El Niño on harvests across Asia, with India's crop seen as central to the tightening global supply picture.
