Production may beat government forecast

India, the world's second-biggest sugar grower, may produce more of the sweetener this year than a government forecast because of higher yields, according to the Indian Sugar Mills Association.

Production may total 27 million metric tonnes in the year ending September 30, compared with 26 million tonnes estimated by the farm minister last month, S L Jain, director general of the millers' group, said in an interview in Dubai late yesterday.

Indian sugar production, second only to that of Brazil, is expected to outstrip demand and may boost exports, slowing a rally in the price of sugar, the best performer in the UBS Bloomberg Constant Maturity Commodity Index this year.

"The upside will be limited and this will put pressure on prices," Harish Galipelli, head of research at Karvy Comtrade Ltd, said by phone from the southern city of Hyderabad on Monday.

India's sugar output may fall 8 per cent in the year ending September from 28.3 million tonnes a year ago because of a delay in crushing, Farm Minister Sharad Pawar said on January 16.

The Indian Sugar Mills Association earlier estimated output at 28 million tonnes, down from a forecast of 31 million tonnes made in December. "The market had rallied with the lower output estimate given by the government earlier," Galipelli said.

Production may fall as low as 22 million tonnes by 2009 as a drop in prices last year curbed planting and prompted some farmers to switch to crops such as wheat, Narendra Murkhumbi, managing director, Shree Renuka Sugars, said.