Sugar mills in Maharashtra, India’s biggest producer, are being forced to purchase the sweetener in its raw form domestically as a shortage of cane threatens to cut output for a second year.
Mills, who failed to import before prices climbed to a 28-year high, may buy 200,000 tonnes from traders, who’ve bought the commodity abroad, said Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation. They need to add quickly to the 20,000 tonnes procured so far before the new marketing year begins October 1, he said.
Sugar has doubled this year amid adverse weather in Brazil and India, the biggest producers, putting the commodity out of reach of most Indian mills. Last week, 10-day volatility for raw-sugar futures in New York rose to the highest in about a year, according to Bloomberg data. That’s prompting buyers to delay purchases, Naiknavare said.
“Not many mills want to take the risks of volatile prices and go through the procedural hassles of importing,” he said. “We have already missed the bus as far as imports are concerned.”
Raw-sugar futures for March delivery rose as much as 0.7 per cent to 23.85 cents a pound in after-hours trading in New York. The rally in 2009 has topped gains among members in the Reuters/Jefferies CRB Index of 19 raw materials amid forecast by the International Sugar Organization that global demand will exceed output by 8.4 MT in the year starting October 1, following a deficit of 10.4 MT this season.
Drought
Maharashtra’s sugar cane output may total 41 MT next season, down 9 per cent from this year, after the weakest monsoon in at least seven years caused drought in about half the country. Cane was planted in 4.25 million hectares across India, down from 4.38 million hectares a year ago. Mills in the state must rely on imported raw sugar in lieu of cane as the main raw material, said Naiknavare, whose group of 190 mills account for a third of India’s total production.