Sugar output seen falling to 31.5 mn tonnes in 2018-19, lower than 2017-18

Closing stock at the end of the year will still be very high despite improvement in exports

Contrary to earlier estimates of sugar production reaching to 35 million tonnes in 2018-19 (October to September) sugar season, the industry now estimates output to be around 31.5 million tonnes, which is even lower than 32.5 million tonnes produced in the 2017-18 season which ended last month. While this is a welcome development, the hangover of high closing stock remains.

Indian Sugar Mills’ Association said on Monday, “Sugar production during the current 2018-19 SS is estimated to be lower considering the adverse impact of weather and rainfall in the three largest sugarcane producing States of UP, Maharashtra and Karnataka and white grub infestation in Maharashtra and North Karnataka. Sugar production in 2018-19 would be around 32 million tonnes and considering diversion for ethanol, production is estimated at 31.5 million tonnes.”

Another encouraging development is that the export market scenario has improved with the global surplus scene now improving. Prices have also risen 20 per cent the past few months. As a result, ISMA raised hopes of exporting 4-5 million tonnes. The government already announced creation of 3 million tonnes of buffer stock a few months ago.
 

Considering that the opening balance was 10,7 million tonnes as on October 1, 2018 and an expected domestic consumption of around 25.5-26 million tonnes and possible export of 4-5 million tonnes during the season, ISMA estimated the closing balance as on September 30, 2019 would be around 11.2-12.7 million tonnes. “This is again a very high opening balance as on October 1, 2019, compared to country’s requirement of two months' consumption,” the association said in a note.

Ethanol demand has big support if the demand is met in full. However, that is still a concern.

Oil marketing companies have opened the tender for ethanol procurement for 2018-19 Sugar year, and for the first time there has been a bid for 485 million litres of ethanol from ‘B’ heavy molasses and 18.4 million litres from sugarcane juice.   Expecting almost all of this to be contracted for and produced by sugar mills in the distilleries, there will be a further reduction in sugar production because of the above diversion of ‘B’ heavy molasses and sugarcane juice towards ethanol. This would mean a diversion of around 0.45 to 0.5 million tonnes of sugar. Therefore, the production estimates for 2018-19, after deducting the quantity set aside for ethanol, will be around 31.5 million tonnes of sugar.

Cane crushing has not yet started in most areas and a better picture would emerge only once it starts and actual trend of yields and sugar recoveries become available.