With a favourable climate and more area sown, the Indian Sugar Mills Association (Isma) says production in the coming year will be well above its earlier, high, estimate.
The sugar year starts in October and runs till the following September. Isma’s earlier forecast was 23 million tonnes (mt) for 2010-11; it has revised this to 25 mt. “Our internal assessment reveals this...on higher acreage, followed by better yield,” said Vivek Saraogi, president of Isma and managing director of Balrampur Chini.
Output of sugarcane in the current year has been 274 mt, translating into a sugar output estimate of 18.5 mt. For 2010-11, the cane production estimate is 300 mt, a bumper crop, said Saraogi. Data released by the Union ministry of agriculture show a 13.3 per cent rise in acreage, at 4.74 million hectares as on July 2, compared to 4.18 million ha on the same date last year.
Rating agency Icra had also, in a June report, estimated sugar output for the next season at 25 mt. A view supported by Prakash Naiknavare, managing director of the Maharashtra State Federation of Co-operative Sugar Factories.
Average sugarcane yield in India is currently estimated at 70 tonnes per ha, which is likely to go up this year due to a favourable monsoon, said B J Maheshwari, wholetime director of Dwarikesh Sugar Industries Ltd.
Domestic sugar stocks, however, have been tight, for the second year in continuation, as production is well below consumption. However, the demand-supply mismatch showed a reduction, following an increase in sugar production from the 14.5 mt in 2008-09. The demand is for 23 mt. Thus, imports have continued. Around 2.5 mt was imported in the 2008-09 sugar year and those for the 2009-10 SY are expected to be 4.0-4.5 mt, said Icra.
Prices falling
While the stock position continues to remain tight, there has been a sharp correction in sugar prices since the peaks seen early this year. Free sugar prices, which had reached a peak of around Rs 40,000 per tonne early this year, had fallen to Rs 28,000 per tonne by April.
The drop was driven by many factors. First, there was an upward revision in production estimates for the current sugar season, ending September. Second, a significant drop in international sugar prices, driven mainly by increased production in Brazil as well as lower dependence on imports by India, following higher output.
In addition, a number of measures taken by the government to curb sugar prices also played a role. These included a continued zero duty on imports; allowing bulk consumers to import sugar freely; tight inventory restrictions imposed on buyers and changes in release norms (from monthly to weekly) for free sale sugar. The price of sugar in the international market fell to less than $500 a tonne by April from over $700 a tonne in January.
