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Business News/ Industry / Agriculture/  Sugar output seen rising on record cane prices
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Sugar output seen rising on record cane prices

Industry experts expect production will expand 3.7% to 25 million tonnes, easing a predicted global deficit

Refined sugar prices climbed to a five-week high on 24 June on the National Commodity and Derivatives Exchange in Mumbai. Photo: BloombergPremium
Refined sugar prices climbed to a five-week high on 24 June on the National Commodity and Derivatives Exchange in Mumbai. Photo: Bloomberg

New Delhi: Sugar output in India, the biggest producer after Brazil, will expand for the first time in three years as record cane prices prompt farmers to increase planting.

Production will expand 3.7% to 25 million tonnes in the harvesting season starting 1 October, the first gain since 2011-2012, according to the median of 11 estimates from traders, producers and industry officials compiled by Bloomberg News. Planting will top last year’s 4.9 million hectares (12.1 million acres), said M.G. Joshi, managing director of the National Federation Cooperative Sugar Factories Ltd.

A bigger harvest will add to the highest domestic stockpiles in five years and ease a global deficit forecast by Czarnikow Group Ltd and Kingsman SA. Futures in New York gained 6.2% this year, rebounding from a 49% slump in the three years through 2013 as global production exceeded demand. World supply will lag behind demand by 500,000 tonnes in 2014-2015 as production stabilizes, Czarnikow said on Wednesday.

“The moment world prices rally to a level Indian exports are profitable, there is scope for a lot of Indian sugar to move out and as a result cap the world price," said Charlotte Kingsman, an analyst with Kingsman, a unit of McGrawHill Financial Inc.’s Platts. “Any surplus in the Indian crop will look to be exported if the world price is right."

Raw sugar for October delivery fell 1.5% to 17.42 cents a pound on ICE Futures US on Wednesday, while white sugar retreated 1.2% to $462.40 a ton on NYSE Liffe in London.

High recovery

Farmers in India planted cane in 4.4 million hectares as of 4 July, compared with 4.5 million hectares a year earlier, agriculture ministry data show. The area in Maharashtra, the nation’s biggest sugar maker, was 845,000 hectares, up from 841,000 hectares while it rose to 1.94 million hectares from 1.93 million hectares in Uttar Pradesh, the second-biggest.

The monsoon rains, which account for more than 70% of India’s annual showers, have been 43% less than a 50-year average since 1 June amid forecasts for an El Nino that’s previously caused droughts, according to the India meteorological department. Abundant dam waters may help cane survive the effects of a possible drought, said Sudha Acharya, a senior analyst at Kotak Commodity Services Ltd in Mumbai.

The chances of a drought in India have increased to 60% from about 25% in April amid forecasts for El Nino, Skymet Weather Services Pvt. Ltd, a New Delhi-based private forecaster, said last week. The weather event, which can roil world agricultural markets as farmers contend with drought or too much rain, may be established by September, according to climate models surveyed by Australia’s Bureau of Meteorology.

Irrigation access

More than 90% of the cane grown in India had access to irrigation at the end of 2010-2011 compared with about 58% for rice, according to the agriculture ministry. The nation’s 85 main dams held 38 billion cubic metres as of 26 June, almost 102% of last year’s storage, according to the Central Water Commission.

Farmers are planting more cane as they are getting one of the best prices, said Abinash Verma, director general of Indian Sugar Mills Association. Growers earn more from planting cane than crops such as wheat, rice, soybeans or turmeric, according to Verma. They get 75,000 for a hectare of cane compared with 45,000 rupees for wheat or rice, he said.

A rally in local refined sugar prices amid a below-normal monsoon will render exports unprofitable, said Michael McDougall, a senior vice-president at Newedge Group in New York.

Refined sugar prices climbed to a five-week high on 24 June on the National Commodity and Derivatives Exchange in Mumbai. The government will pay 3,300 rupees for every tonne of raw sugar exported until September as it wants mills to clear payment of about 11,000 crore for cane supplies, food minister Ram Vilas Paswan said on 23 June.

Shipments totalled about 2.05 million tonnes since 1 October, compared with full-year sales of 350,000 tonnes in 2012-2013, the mills association estimates. Exports are seen at 1.5 million tonnes in 2014-2015, according to the US department of agriculture. Bloomberg

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Published: 10 Jul 2014, 11:12 AM IST
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