Rise in sugar output to stub out likely import

India, the world's biggest sugar consumer, is unlikely to import sugar following an estimated record production of 20.3 million tonne, stated a report by the US Foreign Agricultural Service.

Sugar output estimates have been raised from the earlier 18.43 million tonne owing to increased cane availability and lower-than-anticipated diversion of cane for jaggery production.

As per Indian Sugar Mills Association's (ISMA) initial estimates, domestic sugar output was pegged at 18 million tonne. USDA had pegged last year's output at 14.17 million tonne compared with ISMA's 13.7 million tonne.

Due to higher domestic production and firm international sugar prices, India is set to emerge as a net sugar exporter in the current year after being a net importer for the past two years, the report stated.

The late-season rains last year and the woolly aphid pest almost under control in Maharashtra have been triggers for the cane crop increase in 2005-06, estimated at 266.9 million tonne. The report added that mills started operations in the second week of October, almost two-three weeks earlier than normal, thereby limiting early season cane diversion towards gur production.

Morover, with sugar quoting high prices the demand for cane has proportionately increased, leading to rise in cane prices. The report has also cut its earlier forecast for domestic raw sugar imports in the current year to 50,000 tonne from 1 million tonne on increased domestic production.

Higher prices have induced farmers to increase acreage under cane cultivation. This is expected to result in a rise in sugar output to 22.32 million tonne in the next sugar year. The report also forecasts exports to reach 1.5 million tonne next year from 6,00,000 tonne this year. Acreage is expected to rise to 4.4 million hectares compared with 4.1 million hectares last year.

"Ample irrigation availability and fewer pests and diseases should result in higher yields. Assuming a normal monsoon, sugarcane production is forecast at 288 million tonne, an increase of 8 per cent over last year" the report said.

With sugar prices expected to rule firm in the upcoming season, most of the additional cane will go into mill sugar production," the report said.

With high prices, investments in the industry have gone up by over 90 per cent to Rs 5,200 crore in the last financial year, the report said, with most private sugar industry groups are either expanding their capacities or adding new units.

Further, domestic sugar consumption is estimated to rise by over 4 per cent to 20.4 million tonne (compared with 19.8 million tonne last year) on improved domestic supplies and strong demand.