Massive fall in sugar output next year, but worry not, prices won’t shoot up

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Published: July 8, 2019 11:33:08 AM

During the sugar season October 2019-September 2020, India will produce 28.2 million tonnes of sugar, a drop of 14.4% on-year.

Sugar production to see a 14% slip in the next year.

India’s sugar output is expected to fall by a massive 14% in the next sugar year running from October 2019 till September 2020, according to the Indian Sugar Mills Association (ISMA), a report said. However, the same will not have a tremendous impact on sugar prices because of the availability of opening stock. During the sugar season October 2019-September 2020, India will produce 28.2 million tonnes of sugar, a drop of 14.4% on-year, the CARE Ratings report said. This is owing to lower estimates for Maharashtra and Karnataka where the production is expected to slip 34.7% to 7 million tonnes and 19.8% to 3.5 million tonnes, respectively, during the year.

The opening stock of the new season is at an all-time high of about 14.5 million tonnes and may compensate for the lower production. “Considering production and opening stock, India will have an availability of 42.7 million tonnes of sugar to fulfil the domestic and export requirements,” said report. While domestic consumption will likely see a considerable increase by 2.5% and stand at 26.7 million tonnes, if India exports the same quantity of sugar as it did last year, the export quantity can be pegged around 3 million tonnes.

This surplus amount of sugar because of the opening stock is likely to keep a check on the sugar prices which will remain under pressure. “We expect sugar prices to remain range bound or increase moderately and average in the range of Rs.34-Rs.35 per kg in the coming months,” CARE Ratings report said.

Sugar prices hit a downward trend in 2017-18 on account of a spike in sugar production that year. The production had jumped more than half on a yearly basis to 32.5 million tonnes in 2017-18. The price fell from Rs.39 per kg in October 2017 to the lowest level of Rs.28 per kg in May 2018. The government had intervened in the crashing price matter and fixed the MSP for sugar at Rs 29 per kg on 6 June 2018. The government had to again raise the MSP to Rs 31 per kg on 14 February 2019.

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