Maharashtra sugar output shrinks, may fuel rally

Maharashtra sugar output shrinks, may fuel rally

Mumbai: India’s top sugar producing state is likely to see its 2009/10 output slashed to 4.3 million tonnes, down 10.4% from a previous estimate, two officials told Reuters on Thursday.

Industry officials had earlier in November estimated that the western Maharashtra state will produce 4.8 million tonnes, a little higher than 4.6 million tonnes produced a year ago.

“Recovery rate is low this year. Before the commencement of crushing season we were expecting the recovery rate of 11%, but so far it has been around 10.2%," said a senior official of the state’s Sugar Commissionerate, who declined to be named.

“Recovery will improve in coming weeks, but nearly half the crushing season is over. I think production is likely to be about 4.3 million tonne," he said.

Indian sugar prices have doubled in a past one year after the worst monsoon in 37 years ravaged the crop, contributing to a double digit food inflation, which was 17.40% in the 12 months to 16 January.

The country was banking on Maharashtra for higher output as the weak monsoon hit the cane crop in the second biggest producer Uttar Pradesh state, where output is estimated to fall below 4 million tonnes in 2009/10.

“The drought-like situation in June-July and excess rains in October-November has affected the sucrose accumulation in cane," said a member of Maharashtra State Cooperative Sugar Factories Federation.

Sugar And Price

The spectre of shrinking output in the world’s biggest consumer of the sweetner is bound to affect prices globally.

“The supply situation is very tight. Any drop in the output will be compensated by imports, mainly by white sguar imports," said Ashok Jain, president of Bombay Sugar Merchants Association (BSMA).

“The availability of white sugar is limited while there are many buyers like Pakistan and Indonesia. So, obviously additional Indian demand will fuel prices."

“Considering the availability of cane, we think India will produce around 14.5 million tonnes of sugar in 2009/10," G.S.C. Rao, chief executive officer of Simbhaoli Sugars Ltd told Reuters..

Rao’s estimate of 14.5 million tonnes is 5% lower than a Reuters poll of industry officials in October that showed lower area and scanty rains will keep output at 15.3 million tonnes, severely short of domestic consumption of about 23 million tonnes for a second straight year.

India’s sugar output is expected to be less than 15 million tonnes in the current season to September, Sunil Kakria, managing director of Mawana Sugar , told Reuters in an interview on Thursday.

Prospects of Indian demand of whites, or refined sugar, pushed London-traded futures to a record high of $767 per tonne on 21 Jan.