New Delhi: Sugar output in India, the world’s second-biggest producer, may reach a record next year, boosting prospects for a bigger global surplus.
Output may climb to 28.79 million tonnes (mt) in the year to 30 September 2008, from an estimated 27.43mt, the Foreign Agricultural Service (FAS) at the US embassy in New Delhi said in a 20 April report.
Raw sugar prices have declined 45% in the past year as global output heads for a surplus for the first time in four years. Record production in India may reduce the chances of a recovery in prices of the sweetener and further erode earnings at Bajaj Hindusthan Ltd and other sugar mills in the country.
“Record sugar production has resulted in a glut in the market, lowering prices and swelling up stocks, thus eroding the profitability of sugar mills,” the report said. “Mills are under immense pressure from farmers to crush additional cane despite adverse economics.”
Crop glut: Sugarcane production may rise to a record 325mt in the year ending September 2008.
Prices in India have slumped 30% in the past year on expectations of a bumper harvest, raising the pressure on mills to boost exports. Shipments may more than double to 2.5mt in the year ending 30 September 2008, from 1.1mt this year, FAS said.
Bajaj Hindusthan, the nation’s biggest sugar maker, on 24 April reported a third straight drop in quarterly net income. Shree Renuka Sugars Ltd., India’s third-biggest mill, said last week second-quarter (Q2) profit halved from a year earlier. Balrampur Chini Mills Ltd., the second-biggest, reported Q2 profit slumped 75%.
Shares of Bajaj, Balrampur and Shree Renuka are among the 10 worst-performers on the BSE-500 Index in the past year.
Sugarcane production may rise to a record 325mt in the year ending September 2008 from 315.53mt this year, the report said. An increase in production may boost the inventory 44% to 14.5mt next year, more than twice the normal level of 5.5mt and enough to supply the domestic market for three months, the US report said.