Sugar stocks seen at 2.7 million tonne on October 1

Written by Reuters | New Delhi | Updated: Aug 27 2009, 04:01am hrs
Shrinking cane supplies will see Indias sugar stocks will drop by three-quarters from a year earlier to 2.7 million tonne on October 1, when the new season begins, a leading industry official said on Tuesday.

The government had estimated last month the stock would be 3.5-4.0 million tonne, down from 10 million tonne at the beginning of the season last year.

A weak monsoon would cut the cane crop, and output might not rise beyond 16 million tonne in 2009/10 against 14.8 million tonne in the year to September, said JB Patel, president of the National Federation of Cooperative Sugar Factories.

Despite such forecasts, let me tell you that there is no need for any sort of panic as the government has been very prudent by allowing imports of both raw and white sugar, said Patel, who heads the body representing 349 of Indias 600 sugar mills.

India, the worlds top user of sugar and the biggest producer behind Brazil, has contracted to import 4 million tonne of raws so far in the season, pushing benchmark prices in New York to a 28-1/2-year of 23.33 cents per lb this month.

When we have such large imports, where is the question of shortage Patel asked. Before the start of the new season, about 3 million tonne of imported sugar will arrive and that is a huge quantity, he said.

Early this month, trade sources said sugar stocks had dropped to 6 million tonne on July 31 from 7.6 million tonne in June.

We have sufficient stocks to last until the new seasons sugar starts coming to the market, Patel said.

The country has allowed mills to import duty-free raw sugar until March and white sugar up to November. Patel said next years output would have been substantially higher had monsoon rains been good.

Bumper production in the past two seasons and a freefall in prices dissuaded farmers from planting cane. And weak monsoon rains have dealt a blow to the standing cane crop.

After all you have to realise that climate plays 75% role in determining the size of the crop, while policies play only 25% role. Climate has remained unfavourable for Indian farmers, Patel said.

A sharp drop in cane harvests has forced India to become a large importer this year after exporting a record 5 million tonne in 2007/08.

Sugar production will gradually improve and I believe production will be substantially higher after two years, Patel said.