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The sugar market is expected to tighten as disappointing output in India, the world’s second-largest producer, threatens higher prices for prompt supplies.  

The country’s output in the current season could fall to 26 million tons after disease hurt the cane crop in its top producing region of Uttar Pradesh, according to Ravi Gupta, an executive director with major producer Shree Renuka Sugars Ltd said on the sidelines of the Dubai Sugar Conference last week. That’s about 1 million tons lower than most industry estimates surveyed at the event. 

While sugar production is expected to rebound in the next season, starting October, tipping the world into a surplus, supplies could remain tight in the near term as output in another key producer Thailand, are also seen lower this season. That’s helped propel white sugar futures up more than 8% so far this month. 

“I see a strong demand for white sugar and lower supplies from EU and Thailand,” said Gupta. “We are seeing a possibility of a very low crop in Pakistan which seems to be needing some white sugar to meet the demand.”

Tight refined sugar supplies will boost white sugar’s premium over raw after a period of depressed prices, he added.  

READ: India Sees ‘Bumper’ Sugar Crop, Allowing Exports Next Season 

The Indian government in January permitted mills to ship as much as 1 million tons in the current season, easing restrictions that curbed overseas sales for more than a year. However the pace of shipments has been slow as millers anticipate higher prices in the international market. 

World sugar prices need to stay above $530 dollars a ton to incentivize exports, said Gupta. “For 1 million tons exports to happen, the world market have to move up to price Indian sugar.”