Highlighting that domestic sugar prices have stabilised, with ex-mill price at ₹37.5/kg in Uttar Pradesh and ₹34/kg in Maharashtra, a report by Centrum Broking has said that prices can be expected to rise during off-season.

“Sugar prices, which initially saw favourable conditions at the beginning of the season but later corrected due to the imposition of a cap on sugar diversion, have begun to stabilise. Recently, sugar prices have reached a bottom or stagnated at around ₹37.5-38/kg in Uttar Pradesh, which is profitable and remunerative rate given we are in crushing season and prices can be expected to rise during off-season,” it said in the report, authored by research analyst Sailesh Kanani.

As of March 31, the State-wise crushing data for 2023-24 sugar season (October-September) indicates that 295 million tonnes (mt) cane crushed against 305 mt during the same period in the previous season.

On a national scale, the sugar recovery numbers for this year have improved on a y-o-y basis at 10.15 per cent - thanks to lower diversion. “In this backdrop, we revise expectations upward for sugar production in 2023-24 to 32 mt (from earlier estimate of 31.7 mt), compared to 33.1 mt in 2022-23. This upward revision is primarily attributed to late surge in sugar production in Maharashtra (up 2.1 per cent),” the report said.

However, UP (sugar production up 9.7 per cent) has seen a sharp decline in operational mills in the last fortnight. “Our overall outlook on the sugar sector remains marginally negative. This perspective is influenced by recent notifications from the Government of India affecting ethanol volumes, with a likelihood of a more significant impact on next year’s financial performance. Additionally, the increase in sugar production would lead to higher inventory levels and is expected to exert downward pressure on sugar prices. Nevertheless, we believe that the worst is over for the sector in terms of negative news flow,” it said.