El Niño Heat Wave Sparks Sugar Shortage, Threatening Food Prices

Sugar prices have surged by 40% in recent months due to last year's damaged sugarcane crop, which was affected by excess rains and red-rot disease. As a result, sugar mills diverted some of their production to make ethanol for blending in petrol, further reducing the available supply.

The Indian Sugar and Bio-energy Manufacturers Association (ISMA) has lowered its sugarcane output forecast from 35 million tonnes to 31 million tonnes, citing lower yields due to disease and weather conditions. The association also stated that over 3 million tonnes of sugar was used to produce ethanol in the last season, while 0.8 million tonnes were exported.

With a record-breaking El Niño heat wave expected this year, farm commodity prices are likely to rise further. The ethanol industry is bracing for a hand-to-mouth situation, as corn will have to make up for the shortage of sugar in ethanol production. Corn prices have already touched new highs ahead of harvest, and soybean meal has also become more expensive due to global oilseed price increases.

The poultry sector is expected to bear the brunt of these rising costs, leading to higher prices for consumers. The Indian government may need to intervene by releasing rice from public stocks to ease pressure on corn and reduce food inflation.