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Business News/ Opinion / Online-views/  Record output of sugar may add to worldwide surplus
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Record output of sugar may add to worldwide surplus

Record output of sugar may add to worldwide surplus

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Mumbai: Sugar output in India, the world’s second biggest producer, may reach a record next year, boosting prospects for a bigger global surplus.

Production may rise to 30 million tonnes (mt) in the year ending 30 September 2008, from an estimated 28mt this year, according to the National Federation of Cooperative Sugar Factories Ltd, a grouping of producers. That’s more than the 28.79mt estimated for 2008 by the Foreign Agricultural Service in April.

Record output in India may lower the chances of a recovery in global sugar prices, which slumped by more than one-third in the past year. Sugar has bucked gains in prices of other agricultural commodities such as wheat, corn and soybean, amid forecasts global supply will exceed demand.

“It’s possible that prices have bottomed out, but higher global production will ensure any gains are not sustained," said Prerana, an analyst with Man Financial Commodities India Ltd in Mumbai.

Refined, or white, sugar futures fell 0.2% to $310.8 (Rs12,400) on Monday on London’s Euronext.liffe, extending the past year’s decline to 30%. Raw sugar prices fell 0.1% to 9.79 cents a pound in New York on Monday. Prices may trade at between 8.5 cents and 11 cents a pound this year, Prerana said.

Global production next year will exceed demand by as much as 9.1mt, the International Sugar Organization said on 15 May, 26% more than its previous estimate.

India produced 27.63mt of sugar between 1 October and 30 June, up 48% from a year ago as farmers crushed more cane from a record harvest. Domestic supplies may reach 41.5mt, equal to two years of consumption, after including a surplus of 11.5mt from this year’s crop, Vinay Kumar, managing director of the federation, said. “We may see a downward trend in output only from the following year" or in 2009, he said.

India’s sugar cane output may rise to a record 323mt, up 15% from a year ago, as farmers boosted planting last year to gain from higher prices, the agriculture ministry has said. The crop has this year been planted to 4.43 million hectares.

The record crop prompted the government to more than double its reserves to 5mt, and subsidize exports to prevent a glut. Exports may double to 3mt in 2008, Akhilesh Prasad Singh, the minister of state for food and public distribution, had said on 9 July. Indian companies have won contracts to export 1.5mt since the government lifted a six-month ban on overseas sales in January.

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Published: 18 Jul 2007, 12:31 AM IST
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