MUMBAI:Sugar production may reach a record 25mt in the year ending September 2007, exceeding an earlier estimate, as farmers harvest more cane, according to the Indian Sugar Mills Association. The association had forecast output to reach a record 24mt in September 2006.
Higher output in India, the world’s second-biggest producer, may raise prospects for a bigger global surplus of the commodity, lowering prices further. Refined sugar has declined by a third from a May 2006 peak of $497 (Rs22,365 then) a tonne in London, while raw sugar traded in New York is down 38% in the past year.
“It is definitely bearish for the market,” said Harish Galipelli, head of research at Karvy Comtrade Ltd, by telephone from Hyderabad.
Refined, or white, sugar slid 70 cents, or 0.2%, to $345.10 a tonne on London’s Euronext.liffe exchange as of 10:40am local time. The futures fell 3.5% last year after surging 37% in 2005.
Sugar is headed for its first surplus in four years after price gains in 2004 and 2005 led growers in Brazil, the largest producer, and Asia to boost plantings. The International Sugar Organization last month forecast a world surplus of 7.2mt, 24% higher than previously estimated by the agency.
Domestic sugar cane production this year may reach a record 315.5mt, up 12% from a year earlier, according to the ministry of agriculture. White sugar output has climbed by a fifth to 16.6mt in the five months ended 28 February,according to the National Federation of Cooperative Sugar Factories Ltd.
“We raised the estimate last week because of higher output in Maharashtra,” S.L. Jain, director general of the producers’ group, said in a phone interview from New Delhi. “Maharashtra may produce as much as eight million tonnes this year and will become the biggest sugar producing state,” he added.
The country may have a surplus of at least nine million tonnes at the end of September after meeting domestic and overseas demand of 20mt, Jain said. “I don’t expect exports to be more than six-eight lakh tonnes. There will be huge surplus and it could affect prices,” he added.
Sugar producers have exported 1.6 lakh tonnes since the government lifted a six-month ban on shipments in January, or 16% of the one million tonnes they are expected to sell overseas this year, according to the association.