Indian sugar mills association

Sugar output may miss forecast

Date:	15 Nov 2011

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News ID:	683

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Sugar output in India may drop short of government and industry estimates as wet conditions curbed cane yields amid the country`s heaviest June monsoon rainfall in three years.

Production of refined sugar may be little changed at 24.35 million tonne in the year ending in September, according to a survey of 777 farmers across six states by Geneva-based SGS for Bloomberg. The Indian Sugar Mills Association and the National Federation of Cooperative Sugar Factories estimate output at 26 million tonne and the government at 25 million tonne, compared with 24.3 million tonne last year.

Sugar is heading for the worst year since 2003 in New York after the highest price in three decades in February spurred farmers to plant more cane. Global output will exceed demand by 8.4 million tonne in the year from October 1, the most in nine years, according to Kingsman in September.

A smaller crop than expected in India may derail plans by millers to increase exports by 54% this season, and help slow the decline in futures.

Futures plunged 31% from the high of 36.08 cents a pound on February 2 and have lost 22% this year on the ICE Futures US exchange, worse than the 13% decline in the Standard & Poor`s GSCI Agriculture Index. Futures in Mumbai declined 4.8% this year to R2,830 per 100 kgs.

Farmers in India may harvest 370.4 million tonne of cane, 9.2% more than last year, according to the survey, carried out from October 10 to 25 in states representing 93% of output. The farm ministry expects a 342.2 million tonne harvest. About 64% of the cane may be crushed for sugar production with a recovery rate of 10.26%, SGS said. The rate is based on the average between 2000-2001 and 2009-2010 reported by the cooperative producers, it said.

“The overriding message is that plantings increased because of better prices and margins compared with other crops,” said Mark Oulton, the market research director for SGS, from Wilkes-Barre, Pennsylvania. “Yield projections are down because of an early and very heavy monsoon in some states and drier conditions in others.”

Uttar Pradesh increased by as much as 19% from last season the price mills must pay growers for the crop. Rates were raised to as much as R250 per 100 kgs for the best quality cane from R210, the state government said in a statement on November 8.

While farmers planted 13% more acres this year, yields may drop 3.2%, the survey said. Reporting of bad crop conditions more than doubled to 15% from 7% the previous year. About 33% of farmers describing conditions as bad said it was because of early and heavy monsoon rains, while 44%said it was too dry.

Monsoon rains in June were the heaviest since 2008. Precipitation in July, usually the wettest month of the June-September rainy season, was 14% below a 50-year average.

The outlook for a bigger harvest has prompted producers to ask the government to allow exports of as much as 4 million tonne in the year from October 1, compared with 2.6 million the previous year.

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