Macquarie Sees India’s Sugar Output Falling 8% in 2012-13

Sugar output in India, the world’s second-biggest producer and largest consumer, will fall for the first time in four years in the season starting in October because of dry weather, according to Macquarie Group Ltd. (MQG)

India’s production will fall 8 percent to 24.2 million metric tons in 2012-13, after rising for three consecutive years, Kona Haque, an analyst at the bank in London, wrote in a report e-mailed today. The monsoon, which accounts for more than 70 percent of its annual rainfall, has been 17 percent below average since June 1, said the India Meteorological Department.

“Even if rainfall improves over the coming weeks, a lot of the damage has already been inflicted on this year’s output,” Haque said. “Yields will fall sharply in the southern states due to adverse weather.”

India’s sugar consumption will climb to 24.6 million tons from 24.2 million tons in 2011-12, Macquarie estimates. The country will export 2.8 million tons of the sweetener in the current season and will be unable to keep shipping in 2012-13, Haque said.

“Although the country will not have to dip into imports due to opening stocks of around 3 million tons, we think it will no longer be in a position to export,” Haque said.

Sugar prices in India have climbed 25 percent since June on concerns about the next season’s output, Macquarie said. That’s resulted in a halt to sugar exports as local prices exceeded international levels, making shipments no longer economical, she said.

Indian cane farmers may opt to sell their sugar cane to producers of gur, an unrefined sweetener, as cane price arrears reached a historical level in March, she said. That means the farmer will sell to whichever industry can pay him faster, according to the report.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net