India’s sugar production will likely drop an annual 9% from a previous forecast in the marketing year through September on lower output in drought-affected Maharashtra and Karnataka, but supplies would still exceed demand, the Indian Sugar Mills Association (ISMA) said on Wednesday.
The industry body has now trimmed its earlier forecast of 23.4 million tonnes for the 2016-17 marketing year to 21.3 million tonnes but it has projected a rebound in production next year.
“Considering that some sugar mills have closed their operations in the drought affected areas mostly in Maharashtra and Karnataka and field reports that sugarcane availability in these two states is lower than earlier expectations, as well as reports of lower yields per hectare of sugarcane and slightly lower sugar recoveries in parts of Maharashtra and Karnataka, ISMA decided to revise its estimates of sugar production for 2016-17,” ISMA said in a statement.
However, sugar supplies still remain above the domestic consumption level, ISMA said, as the country had carry-forward stocks of 7.75 million tonnes from 2015-16. Assuming that the last eight months of the current season through September could witness sugar sales akin to the last year’s trend, the sugar despatches in 2016-17 would be around 24.2 million tonnes. This means the closing stock of sugar in 2016-17 would be 4.85 million tonnes, which is equivalent of two-and-a-half month’s consumption.
Sugar prices started rising last year in response to an anticipated fall in supplies in 2016-17 and have touched a seven-year high earlier this year, after years of remaining below costs. In fact, in 2014-15, sugar prices touched a six-year low, dropping below even the cane cost, which was touted to be the highest among the world’s major sugar producers due to “arbitrary” methods of cane price fixation by the state governments.
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The country’s sugar production up to January 15 dropped 5% from a year before to 10.48 million tonnes. Now that sugar mills, in the drought affected areas, have started closing down, the difference from the last year level will be higher as the season progresses, ISMA said.
However, while production in Maharashtra and Karnataka is expected to be lower than a year before, Uttar Pradesh will likely see output rising from a year earlier, ISMA said.
The area under high yielding and high sugar recovery variety Co0238 is significantly more than last year. So, Uttar Pradesh will beat Maharashtra to become India’s largest sugar-producing state in 2016-17 for the first time since 2005-06.
In the current sugar season, 2.8 million tonnes of sugar was produced in October and November.
There are reasons to believe that the sugar mills will be starting sugar production by the of October (after Diwali) in most parts of the country, including in UP and Maharashtra, ISMA said.
“Also, because of surplus sugarcane production next season, mills will start early. Therefore, new season’s sugar should be available from the end of October 2017.
Therefore, old sugar equivalent of even 45 to 60 days is more than sufficient to cover the period before the new season’s sugar comes into the market, which as suggested above, would be from the end of October 2017.”
“Therefore… there is no reason to feel that there is any shortage of sugar in the country or there is need to import any sugar,” the sugar body said.