Sugar production set for record rise

Domestic sugar output may reach a record next year, boosting prospects for a bigger global surplus.

Sugar production may rise to 30 million tonnes by September 30, 2008, from an estimated 28 million tonnes this year, according to the National Federation of Cooperative Sugar Factories, a grouping of producers. This is more than the 28.79 million tonnes estimated for 2008 by the Foreign Agricultural Service in April.

The record output in India may lower the chances of a recovery in global sugar prices, which have slumped by more than a third in the past year. Sugar has bucked gains in prices of other agricultural commodities such as wheat, corn and soybeans, amid forecasts of global supply exceeding the demand.

"It's possible that prices have bottomed out. But higher global production will ensure that any gains will not be sustained,'' said Prerana, an analyst with Man Financial Commodities India.

Refined, or white, sugar futures fell 0.2 per cent to $310.8 yesterday on the London's Euronext.liffe, extending the past year's decline to 30 per cent. Raw sugar prices fell 0.1 per cent to 9.79 cents a pound in New York yesterday. Prices may trade at between 8.5 cents a pound to 11 cents a pound this year, Prerana said.

The global production next year would exceed demand by as much as 9.1 million tonnes, the International Sugar Organization said, 26 per cent more than its previous estimate. India produced 27.63 million tonnes of sugar between October 1 and June 30, up 48 per cent from a year ago as farmers crushed more cane from a record harvest. The domestic supplies may reach 41.5 million tonnes, equal to two years of consumption, after including a surplus of 11.5 million tonnes from this year's crop, Vinay Kumar, managing director of the federation, said.

"We may see a downward trend in output only from the following year or in 2009," he said.

India's sugar cane output may rise to a record 323 million tonnes, up 15 per cent from a year ago, as farmers boosted planting last year to gain from higher prices, the farm ministry has said. The crop has this year been planted in 4.43 million hectares.

The record crop prompted the government to more than double its reserves to 5 million tonnes, and subsidize exports to prevent a glut. Exports may double to 3 million tonnes in 2008, Akilesh Prasad Singh, the minister of state for agriculture, consumer affairs, food and public distribution said on July 9.

Indian companies have won contracts to export 1.5 million tonnes since the government lifted a six-month ban on overseas sales in January.