Sugar Output in India to Decline on Drought in Some Areas

Discussion in 'Economy & Infrastructure' started by Son of Govinda, Apr 11, 2012.

  1. Son of Govinda

    Son of Govinda Regular Member

    Apr 1, 2012
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    Sugar Output in India to Decline on Drought in Some Areas - Businessweek

    Sugar output in India, the second- biggest producer, will drop for the first time in four years next season as dry weather in some regions spurs farmers to plant other crops, broker and researcher Kingsman SA said.

    The harvest may total 24.5 million metric tons in the season beginning Oct. 1 from as much as 25.8 million tons this year, Charlotte Kingsman, a New Delhi-based sugar analyst, said in an e-mail. The nation may continue exports for a third year as supplies from the new crop and inventories will exceed domestic demand by about 6.5 million tons, she said.

    Futures have lost 36 percent since reaching a three-decade high in February last year as the global market swung to a surplus, ending three years of shortages. Smaller crops in India and Thailand may cut the surplus in 2012-2013, Kingsman said.

    “We don’t expect the surplus in 2012-2013 to be as large as for 2011-2012, but it will definitely be big enough to keep world prices under pressure,” she said. “Both the Thai and the Indian crop are expected to be large in 2012-2013. This means that we continue to foresee a surplus.”

    The global surplus may fall to 8 million tons in the 2012-2013 season starting in April, down from 11.1 million tons in 2011-2012, according to Sucres et Denrees SA.

    Raw sugar for July delivery dropped 1.9 percent to end at 23.16 cents a pound on ICE Futures U.S. in New York yesterday, the lowest close since Jan. 5. White sugar for August delivery declined 1.9 percent to $621 a ton on NYSE Liffe.

    ‘Increase Profitability’
    “Sugar prices in India will rise from the current levels because of an expected drop in production,” said Anup Ranadive, an analyst at Derivium Tradition Securities (India) Pvt. “This will help sugar mills increase profitability.”

    Prices have fallen 4.2 percent this year on the National Commodity & Derivatives Exchange Ltd. The April-delivery contract traded little changed at 2,760 rupees ($54) per 100 kilograms at 10:55 a.m. Mumbai time.

    Production in Brazil’s Center South region will be 33 million tons, up from 31.3 million in 2011-2012, on cane output of 518 million tons, compared with 494.2 million tons a year earlier, according to Sucden Financial Ltd.

    “There are still doubts as to what the Brazilian crop will be, but by the middle of the third quarter of this year we anticipate a significant surplus available on the market, putting pressure on prices,” Kingsman said. Indian sugar “has to compete with Thai sugar and soon with Brazilian sugar.”

    Thai Crop
    Thai output may total 10.3 million tons in 2012-2013, compared with 10.67 million tons a year earlier, Kingsman said. The Lausanne, Switzerland-based Kingsman SA was founded by Jonathan Kingsman, who’s traded the commodity for more than three decades.

    India, which is exporting sugar for a second straight year, may have a surplus of at least 1 million tons more to ship this season, Kingsman said.

    “Whether the government allows some more exports on top of the 3 million tons already announced will depend on domestic prices and cane arrears,” Kingsman said. “In theory, India has the capacity to export more than 500,000 per month, so the sugar could move out without too many difficulties.”

    Production (US43CSIN) in India climbed 13 percent to 23.2 million tons in the six months ended March 31, according to the Indian Sugar Mills Association.

    Indian mills are seeking approval for additional exports as they need money to pay farmers for cane. Sugar-makers owed growers 84 billion rupees ($1.6 billion) in arrears as of Feb. 29, Food Minister K.V. Thomas told parliament on March 26.

    “Farmers seem confident that they will receive the amount due,” Kingsman said. “We do expect a drop in acreage in Maharashtra. The drought in certain areas has pushed some farmers to switch to less water-consuming crops like soybean, even though the returns are not that good.”
  3. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

    Nov 16, 2009
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    Several places in MH are about to be declared as Drought-hit. Situation is worrisome in eastern & southern parts.

    Apart from no rains, there is another reason to farmers switching to other crops. Sometimes farmers are forced by local lobbies to grow sugarcane. Now these farmers are rejecting the pressure & turning to crops they want to grow for themselves.

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