Dubai: India, the world’s second biggest sugar grower, may produce more of the sweetener this year than a government forecast because of higher yields, the Indian Sugar Mills Association said.
Production may total 27 million tonnes (mt) in the year ending 30 September, compared with 26mt estimated by agriculture minister Sharad Pawar last month, S.L. Jain, director general of the millers’ group, said in an interview in Dubai late on Sunday.
Indian sugar production, second only to that of Brazil, is expected to outstrip demand and may boost exports, slowing a rally in the price of sugar, the best performer in the UBS Bloomberg Constant Maturity Commodity Index this year.
“The upside will be limited and this will put pressure on prices,” Harish Galipelli, head of research at Karvy Comtrade Ltd, said by phone from Hyderabad on Monday.
India’s sugar output may fall 8% in the year ending September from 28.3mt a year ago because of a delay in crushing, the agriculture minister had said on 16 January.
The Indian Sugar Mills Association had earlier estimated output at 28mt, down from a forecast of 31mt made in December.
“The market had rallied with the lower output estimate given by the government earlier,” Galipelli said.
Production may fall as low as 22mt by 2009 as a drop in prices last year curbed planting and prompted some farmers to switch to crops such as wheat, Narendra Murkhumbi, managing director of Shree Renuka Sugars Ltd, India’s biggest sugar refiner, said at the conference.
“Low prices last year have not sent out good signals to farmers. It is bound to reflect in planting,” Murkhumbi said. Output may total 28mt this year, he said.
Production fell to 6mt in October-December from 7.34mt a year earlier, according to provisional data from the National Federation of Cooperative Sugar Factories Ltd, a producers’ group.
Output may drop to 22mt in the year ending 30 September 2009, as farmers switch to whe-at and oilseeds, Vinay Kumar, managing director of the federation, said on 5 December.
“It’s too early to take a call on what will happen next year. Farmers are getting very good prices for sugar cane and there’s no reason to cut planting,” Jain said.
Farmers may not reduce cane planting next year as prices have recovered, Jain said, adding that he expected sugar to trade between 12 cents and 14 cents a pound (0.45kg) “in the near term.”
“People who are talking about a lower Indian output are ignoring the higher recovery from crushing of a bigger crop,” Jain said. “There’s not going to be any major shift away from sugar as prices have recovered.”
Sugar for March delivery rose 0.2% to 12.38 cents a pou-nd on ICE Futures US, formerly the New York Board of Trade, at 9:33am London time. Sugar, which has gained 14.5 % this year, reached a 17-month high of 13.09 cents on 17 January.
India may export at least 3mt of sugar in the year to 30 September, Jain said. Mills have sold 2.2mt, including 1.4mt of raw sugar, since 1 October, he said.
The International Sugar Organization says India may ship as much as 3mt a year of the sweetener until 2010.
The Indian Sugar Exim Corp., a producer-funded trading firm, has sold 800,000 tonnes of sugar since the beginning of October and may sell more if it receives “attractive” prices, said Jain, who’s also a committee member of the company.
Pratik Parija in New Delhi contributed to this story.