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  1. Sugar production up 16% till May 15, hits 8-year high

Sugar production up 16% till May 15, hits 8-year high

Mills produced 27.85 MT compared with 24 MT in 2013-14, says Isma

By: | New Delhi | Published: May 19, 2015 12:10 AM

India’s sugar production rose 16% up to mid-May in the marketing year through September, hitting an eight-year high and breaching a food ministry forecast for 2014-15.

According to the latest data compiled by the Indian Sugar Mills Association (Isma), mills produced 27.85 million tonne up to May 15, compared with 24 million tonne  produced during the corresponding period in 2013-14. As many as 45 mills are still operational, against 27 mills in the same period last year.

Earlier this year, the food ministry had projected the country’s sugar production for 2014-15 at 26.5 million tonne.

The production this year is the highest since 2006-07 when it was 28.4 million tonne.

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The higher-than-expected output has further aggravated a glut in the market and continues to pressure ex-factory sugar prices, which are already at six-year lows in key producing regions. The market has already been awash with supplies, thanks to the fifth straight year of surplus sugar production through 2014-15 and a plunge in global prices just made the matter worse for Indian mills.

Maharashtra produced 10.44 million tonne of sugar till May 15, up a whopping 35% from 7.72 million tonne in the corresponding period last year. In Uttar Pradesh, mills produced 7.08 million tonne till May 15, compared with 6.51 million tonne a year before.

Consumption flat

While sugar production is much higher than last year, despatches of the sweetener for domestic consumption during the current season until April 30 were almost at the same level of 14.6 million tonne.  This means domestic demand growth remains tepid even as mills increasingly seek to offload stocks to clear cane arrears that have crossed R21,000 crore now. Industry executives say bulk consumers have desisted from stocking up well, anticipating prices to either fall further or stay subdued. Already prices in Maharashtra and UP are hovering around six-year lows.

Exports to hit 7.6 LT

Due to depressed global prices, mills have exported only 4.6 lakh tonne of sugar (both raw and refined) until the first week of May, Isma said.  Another 2-3 lakh tonne of sugar may get exported in the remaining period of the current year through September, the association said. The country’s sugar exports had hit a two-year high of 27.90 lakh tonne in 2013-14.

Closing stocks at six-year high

The sugar stocks at the end of this season in September is estimated to touch 10.30 million tonne, the highest in the last six sugar seasons.  Sugar prices in the domestic market are highly depressed and are ruling at R2,600 per quintal in northern regions and at R2,300 per quintal in southern and western parts of the country.

Despite cane arrears hitting a record and amounting to almost 35% of the total cane price payable in 2014-15, area under sugarcane is estimated to remain at the same level and cane availability in the next year seems to be more than the requirement, according to Isma projections. The latest farm ministry data showed cane coverage as of May 15 was just 1% down from a year before. Returns to farmers from sugarcane is almost 50% more than the returns from the competing crops like wheat and paddy, cotton, soya etc, said Isma.  The cane prices have gone up by over 50% in the last three years, unmatched by any other crop in the country, it added.

Isma has reiterated its demand that the government buy at least 10% of the country’s production at a price based on the fair and remunerative price set by the Centre to create a strategic reserve. Such a move would spur demand and halt a slide in sugar prices.

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