Higher output to help India re-enter export market.
India, the second-biggest sugarcane producer, is likely to see a 35 per cent increase in output in the sugar year beginning this October. While the agriculture ministry data estimate sugarcane output at 324 million tonnes (mt), 17 per cent higher than last year, a recent meeting of state cane commissioners pegged the output at 345 mt. The industry estimate is 353 mt.
According to an official of the apex industry body, Indian Sugar Mills Association (Isma), the country should produce in excess of 25 mt as it produced 26.3 mt in 2007-08 when sugarcane output was 346 mt.
| BETTER PROSPECTS | ||
| 2009-10 | 2010-11 | |
| Acreage | 4.2 mn ha | 5.04 mn ha |
| Cane production | 277 mt | 353 mt |
| Crushing by sugar mills | 185 mt | 247 mt |
| Sugar output | 19 mt | 25.5 mt |
| Consumption by gur units | 57 mt | 66 mt |
| Gur output | 5.5 mt | 6.5 mt |
| For seeds/chewing | 35 mt | 40 mt |
| Source: Industry estimates (mn ha: million hectares, mt: million tonnes) | ||
Around a dozen stakeholders, producers, associations, traders and exporters surveyed by Business Standard expected production to be in the range of 25-26 mt.
Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, says the higher output estimate is mainly due to a rise in the area under the crop, good rain and increased productivity. Record sugar prices early this year and incentives paid by the mills prompted farmers to plant more.
Industry watchers also expect a better recovery rate this year due to adequate rain. A delayed start by mills in Uttar Pradesh will also ensure a better recovery.
Another factor that will boost sugar production is lower cane diversion to gur (jaggery). According to Arun Khandelwal, president of the Muzzafarnagar Gur Traders Federation, diversion could fall from 35 per cent to 30 per cent in Uttar Pradesh, which accounts for 55 per cent of the country’s gur output. “Gur traders burnt their fingers last year and are expected to be less active this year,” he said.
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This higher output will facilitate India’s re-entry into the global sugar trade at a time international sugar prices are higher than domestic prices. The buoyancy in the international sugar market is due to apprehension of a lower crop in Brazil, the world’s biggest producer. The global market may not have the projected three-million-tonne surplus next year.
Rising uncertainty about Brazilian shipments and tightness in other global markets (floods in Pakistan and China, drought in Russia) have led to predictions that global sugar prices will remain firm until the middle of 2011.
With an opening stock of five million tonnes, sugar availability for the next season will be 30.5 million tonnes. Considering domestic consumption of 22-23 million tonnes and four million tonnes as next season’s opening stock, the country will have a surplus of 3.5 million tonnes.
Both Isma and the cooperative federation expect the country to ship at least 2.5-3 million tonnes sugar in the current year, including around one million tonnes under the re-export obligation.
The buoyant global demand will have twin impact on the industry, say experts. First, the industry will be able to earn a premium over domestic realisation. Second, the export of surplus will ensure that domestic prices remain healthy.
It is, however, unlikely that the industry will see the handsome price of around Rs 4,000 a quintal that prevailed in January. Sugar prices are expected to remain stay between Rs 2,600 and Rs 2,800 a quintal.