Sugar output in India, the biggest producer after Brazil, is set to decline for a second year as a drought curbs planting, potentially increasing imports. Prices in New York advanced.
The harvest will fall 6.5 percent to 23 million metric tons in the year starting Oct. 1 from 24.6 million tons this year, according to the median of estimates of four traders, an analyst, a producer and an industry official compiled by Bloomberg. That would be less than the local demand of more than 24 million tons in 2013-2014, said Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd. (SHRS), India’s biggest refiner.
Sugar has slumped about 50 percent in New York since reaching a three-decade high in February 2011 as production from Brazil to Thailand and China increased, widening a glut. Falling Indian output after three years of surpluses may boost imports and help curb the slide in prices, which has contributed to global food costs tracked by the United Nations’ Food & Agriculture Organization falling for a fifth month in February.
“India affects the world market through imports and exports, so next year’s crop will definitely have an impact,” said Charlotte Kingsman, a New Delhi-based sugar analyst at broker and researcher Kingsman SA. “If the production is very low, imports are likely to happen.”
The global surplus for the 2012-2013 season started Oct. 1 will be 8.5 million tons, 38 percent bigger than estimated in November, partly because of more supplies from Brazil, the International Sugar Organization said Feb. 21. World production will climb to a record 180.4 million tons, while consumption will total 171.8 million tons, the London-based group said.
“India’s production will be significantly less than the expected demand,” Shree Renuka’s Murkumbi said. Planting is “distinctly low” in Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh states because of the dry weather, he said.
Parts of Maharashtra and Karnataka, which together account for 45 percent of India’s output, have faced drought in the past 24 months, hurting planting, according to the farm ministry. Maharashtra’s output may slump to 4 million tons in 2013-2014 from an estimated 8 million tons this season, according to Pandurang Shelke, joint director at the Sugar Commissionerate of Maharashtra.
“The current drought situation will reflect as a drop in country’s total production next year,” Rahil Shaikh, managing director of ED&F Man Commodities India Pvt., said by phone.
India may still be able to avert imports next year as inventories may total about 7.5 million tons on Oct. 1, said Abinash Verma, director general of the Indian Sugar Mills Association. Refiners, seeking to profit from the slump in global prices, have contracted to import about 1 million tons of raw sugar since Oct. 1, including as much as 300,000 tons for sale in the local market, said Vinay Kumar, managing director of National Federation of Cooperative Sugar Factories Ltd.
“Local prices are falling because of a surplus and imports are hurting the sentiments in the market,” Kumar said. “Exports can’t happen as global prices are too low.”
The May-delivery contract climbed as much as 0.6 percent to 17.95 cents a pound on ICE Futures U.S, and traded at 17.87 cents at 2:06 p.m. in Mumbai.
Futures have fallen for six straight months in Mumbai after climbing to a 20-month high in August. The contract for delivery in April dropped 0.6 percent at 2,897 rupees ($53.29) per 100 kilograms on the National Commodity & Derivatives Exchange Ltd.
Stockpiles in India will jump to 9.2 million tons at the beginning of October from 6.7 million tons a year earlier, leaving a surplus of 3.4 million tons for exports, Kumar said.
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