India’s sugar production will remain close to record levels, but exports will slump to a four-year low, as market disruptions unwind, US officials said in their first forecasts for next season.

Indian sugar output will in 2022-23, as starts in October, fall back from the record 36.9m tonnes expected for this season, the US Department of Agriculture’s New Delhi bureau said.

“A normal monsoon will likely correct [cane] yields downward as opposed to the buoyant production demonstrated in the current season,” when ample rains helped lift results in Karnataka and Maharashtra to 100-130 tonnes per hectare, above the typical 90 tonnes per hectare.

Last week, private weather forecaster Skymet forecast that India would indeed receive average monsoon rains this year, with state-run India Meteorological Department expected later this month to announce its annual monsoon outlook.

Nonetheless, at 35.8m tonnes, the Indian sugar production expected by the USDA bureau for next season would remain the second largest ever, and could challenge this year’s record if monsoon rainfall proves “strong”.

‘Conspicuous departure’

Indian sugar exports, however, will slump by 41% to 5.21m tonnes, making a “conspicuous departure toward normal trade volumes” from this season’s record levels, and in fact hitting the lowest since 2018-19, the bureau said.

India’s growing ethanol industry will increase its take to the equivalent of 5.0m tonnes of sugar, from 3.5m tonnes this season, with domestic food consumption growing too.

But the biggest driver of the slide in exports will be the return of “normal market conditions”, in pace of this season’s one-off factors, notably disappointing Brazilian production, which have supported international prices at unusually high levels compared with Indian values, promoting exports.

“Indian sugar prices have largely traded lower than prevailing international prices during 2021-22, making Indian exports competitive without export subsidies,” which the government has in fact withdrawn.

This season, “competitive prices, production shortfalls in Brazil, and the Russian invasion of Ukraine will keep demand steady, with Indian exporters capitalising on this opportunity”.

Record exports

The bureau forecast India’s 2021-22 sugar exports at 8.78m tonnes on a raw value basis, well above the record of 7.46m tonnes set the season before.

The Indian Sugar Mills Association has forecast sugar exports this season at more than 9m tonnes, reporting on Monday that mills have already signed contracts to export up to 8m tonnes.

The industry group reported Indian sugar output so far at 32.9m tonnes, up from the 29.2m tonnes achieved as of the same period of last season.