Indian sugar mills association

Cogencis poll: India 2019-20 sugar output seen down 18% at 27 mln tn

Date:	30 Sep 2019

Source:	Cogencis

Reporter:	Preeti Bhagat

News ID:	42694

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NEW DELHI – Sugar production in India in the season starting Tuesday is seen at 27 mln tn, according to the average of the estimates of 13 prominent players in the sugar industry polled by Cogencis.

At 27 mln tn, the output in 2019-20 (Oct-Sep) would be 17.9% lower on year. The expected decline in output is partly due to low acreage–at 5.2 mln ha, 5.5% lower on year–and partly because of erratic rainfall, which might hit yields.

However, in its preliminary estimate, Indian Sugar Mills Association pegged the output at 28.2 mln tn. While the market went with ISMA's estimate till August, things changed after floods in second-largest producer Maharashtra in Aug-Sep.

"There were flash floods (earlier this month) because of heavy rainfall in south Maharashtra, so cane fields situated at Krishna river basin in Maharashtra and Karnataka has been badly impacted," said an official at Triveni Engineering and Industries Ltd.

From 7.0 mln tn pegged earlier, production in the state is now seen at 6.0 mln tn or even lower. The state produced 10.7 mln tn in the season ending today.

Overall production is also seen lower because of weak rainfall in 2018 and low water levels in key reservoirs, which had hit sowing of the 15-month and 12-month crops.

"Maharashtra has gone through two turmoils. One, drought and second, floods on the western side….Drought was so severe that lot of cane has already been diverted for fodder and whatever has been flooded has gone to the dogs," said Prakash Naiknaware, managing director of National Federation of Cooperative Sugar Factories.

Around 151 tehsils, including major sugarcane growing areas of the state, had been declared drought-hit last year.

"Tonnage will be less, so less cane will be available and whatever cane is available, the content of sugar will be less…Parts of Karnataka and Gujarat bordering Maharashtra have gone through the same situation," Naiknaware said.

Following lack of cattle feed for fodder last summer, cane farmers diverted a large chunk of the ratoon cane crop for fodder, which fetched them higher returns. Fodder camps offered 4-5 rupees a kg for sugarcane, higher than the 3 rupees a kg farmers would get from mills, that too in instalments.

Around 50 mills are likely to remain shut for the next season due to low cane availability. In 2018-19, 195 mills crushed cane.

"Damage due to drought last year and floods in Kolhapur and Sangli last month reduced the availability of cane for crushing to 57 mln tn from earlier assessment of 94 mln tn," an official at Maharashtra sugar directorate said.

It's not just Maharashtra that is pulling the country's overall output lower. Third-largest producer Karnataka is also contributing to the shortfall. Production in the two states has been hit partly due to drought and partly by floods, said N. Ramanathan, managing director of Ponni Sugars.

Production of the sweetener in Karnataka is expected to fall over 24% on year to 3.3 mln tn in 2019-20.

Uttar Pradesh, the top producing state, is likely to remain untouched by all adversities and output in the state is seen almost similar to this season at 11.8 mln tn.

"There may be some problem…wherever there is water logging and the cane has fallen. But we will come to know this later because cane always has the tendency to bounce back to its original growth rate," an official at Uttar Pradesh Sugar Mills Association said.

As the government has made producing ethanol more remunerative compared to sugar, more distilleries are being set up and sugar mills may divert more cane towards the bio-fuel next season. According to industry estimates, 1.0-1.5 mln tn of sugarcane may be diverted towards ethanol in the new season. In 2018-19, about 50,000 tn less sugar was produced due to this.

To increase the level of blending and boost production of the green fuel, the Centre recently raised prices at which oil marketing companies would buy ethanol from sugar mills.

The price of ethanol made from B-heavy molasses has been raised to 54.27 rupees a ltr for 2019-20 (Dec-Nov) from 52.43 rupees a ltr in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to 59.48 rupees a ltr and 43.75 rupees a ltr, respectively.

In 2019-20 (Dec-Nov), oil marketing companies have floated a tender to purchase around 5.11 bln ltr of ethanol. This would take the ethanol-petrol blending level to 10%.

The overall reduction in production would help India reduce the glut in the market to an extent, as the country is holding record high stocks of 14.5 mln tn. The total supplies would be much higher than the annual domestic consumption of 26.0-26.5 mln tn.

If India is able to push out even some amount of sugar from the export target of 6 mln tn for the next season, it would give some relief to the ailing sector. Abundant carryover stocks since last three seasons have pushed domestic prices below the cost of production.

Summary of the poll by Cogencis on India's 2019-20 (Oct-Sep) sugar output:

* Range of expectations: 26.3-28.0 mln tn

* Mean: 27.2 mln tn

* Median: 27.0 mln tn

* Mode: 27.0 mln tn

The output (in mln tn) estimates by polled entities:

Poll participant	Output (2019-20)	Output (2018-19)
National Federation of Cooperative Sugar Factories	26.3	32.9
Marex Spectron	27.0	32.9
Greenleaf Corp	27.8	32.9
ITC	27.0	32.9
Meir Commodities	27.0-28.0	32.9
Sakthi Sugars	28.0	32.9
Ponni Sugars	27.0	32.9
Leading Uttar Pradesh-based sugar mill	26.5	32.9
Leading Mumbai-based sugar refiner	27.0-28.0	32.9
Pune-based sugar supplier company	27.0	32.9
Global trade brokerage	27.0	32.9
Global agriculture supply chain company	26.5-27.2	32.9
Global multinational commodity trading firm	28.0	32.9

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