India Sugar Rally Driven by Speculation, Not Shortage

India has enough sugar stocks to meet increased festival-season demand, with the recent surge in prices being driven mainly by speculative buying rather than an actual supply shortage, according to the head of the Indian Sugar Mills Association. Sugar prices have risen more than 40% in two months to a record high.

The government recently allowed duty-free imports of 1 million metric tons of raw sugar, its first such move in nearly a decade, to ease market concerns. Sugar demand typically rises between August and November as festivals including Ganesh Chaturthi, Dussehra and Diwali boost consumption of sweets and confectionery.

India produced 27.9 million tons of sugar in the year ending September 30, compared with consumption of around 28 million to 28.5 million tons. Mills also diverted about 3 million tons for ethanol and exported around 800,000 tons. Opening stocks for the new marketing year are expected to be about 3.5 million tons, down from 5 million tons last year.

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