Mumbai: India’s sugar output, the second biggest in the world, may fall as much as 25% next year, sparking the steepest jump in prices since March.
Production may decline to 20 million tonnes (mt) in the year ending September, 2009, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd, said in New Delhi. That’s less than the 22mt forecast by the London-based International Sugar Organization.
Lower output may support raw sugar prices that have risen 26% this year as record oil costs boost demand for biofuels made from cane. Farmers in India are growing maize, rice and soya beans instead of sugar after the commodities jumped to their highest this year, Kumar said.
“Sugar prices will rise further as India’s production falls and demand rises during the festival season” starting in September, said Amol Tilak, an analyst at Kotak Commodity Services Ltd in Mumbai. “If oil reaches $150 (Rs6,480) a barrel, prices will rise faster.”
A smaller crop may halve India’s exports to 2mt, Kumar said. The national federation of sugar mills produces almost half of the country’s output.
Sugar for August delivery on India’s National Commodity and Derivatives Exchange rose 4% to Rs1,626 per 100kg, the most since March 4.
Raw sugar futures traded on ICE Futures US, the former New York Board of Trade, gained as much as 2.8% to 13.97 cents a pound. The most-active contract closed at a 25-year high of 19.3 cents a pound on 3 February 2006.
Raw sugar futures traded on ICE Futures US gained as much as 1% to 13.73 cents a pound in the after-hours trading. Prices declined 2.9% on Monday. The most active contract closed at a 25-year high of 19.3 cents a pound on 3 February 2006.
Global refined sugar production will probably exceed demand by 2mt in the 12 months through March, according to Lausanne, Switzerland-based researcher Kingsman SA estimates.
Indian cane growers planted the crop across 4.31 million ha by 11 July, 19% less than a year earlier, the agriculture ministry said last week.
“We will continue to export sugar next year though the quantity will not be the same,” Kumar said. “Removal of export incentives and better domestic prices may discourage exports.”
India may have a stockpile of 12mt in the new crop year beginning 1 October, Kumar said.