El Niño and Weak Monsoon Threaten India's Sugar Harvest
India's worst monsoon in 11 years has raised fears of a poor sugarcane harvest and pushed sugar prices higher during the Hindu festival season, a period of heavy demand for sweets.
India is the world's second-largest producer, so a weak cane crop hurts its own farmers and shoppers while tightening supply for buyers abroad. The U.S. Department of Agriculture cut its forecast for India's sugar production in the 2026/27 season starting in October to 29.5 million metric tons, down from 33.6 million tons, Reuters reported.
The downgrade follows a run of poor harvest signals. As of early September, India's output was expected to decline in the coming season as dryness linked to El Niño threatened the harvest starting the next month. Sugar futures jumped 21% in August 2026 due mostly to El Niño, Reuters reported.
Domestic pressure built earlier. Indian sugar prices rose about 10% in the month before Aug. 10, 2026, to a record high, and were expected to stay high for at least the next three months. In the 2025/26 season, India's production fell below consumption. Output for the marketing year ending in September was expected at between 28.5 million and 29 million metric tons.
That shortfall has kept India, once the world's second-largest sugar exporter, largely out of the export market. In May 2026, India banned sugar exports until end-September to protect supply, when gross production for the season ending Sept. 30 was forecast at 32 million tons, down from an earlier projection of 32.4 million tons, Bloomberg reported. As of June 2026, the country was expected to have little surplus for export for at least three more seasons.
Sugar is also caught in India's fuel policy. Sugarcane can be milled for sugar or diverted to make ethanol, which is blended into petrol. In August 2026, India considered curbing the use of cane for ethanol to tame record-high sugar prices. The government had allowed diversion of 40 LMT, or lakh metric tons, of sugar for ethanol production for the 2024-25 ethanol supply year.
New Delhi has set targets of 10% blending of fuel-grade ethanol with petrol by 2022, 15% by 2026 and 20% by 2030. India once depended almost entirely on sugarcane, a seasonal crop, with annual ethanol production capacity of roughly 400 crore litres.
Weather remains the central risk. The India Meteorological Department reduced its 2026 seasonal monsoon forecast to 90 percent of the Long Period Average, the long-term mean used as a benchmark, placing 2026 in the below-normal category. States and sugar mills were advised to begin crushing from Oct. 15, 2026.
