Sugar output in India, the second-biggest producer, is set to exceed demand for a fourth year as the best start to the monsoon season in at least 12 years curbs damage from a drought and boosts the outlook for exports.
The harvest will total 23.5 million tons in the 12 months starting Oct. 1, according to the median of estimates from four traders, five millers and two industry executives in a Bloomberg survey. That compares with a crop of 25 million tons this year, more than the 23 million tons needed to meet domestic use. A survey in March had predicted an output of 23 million tons.
Shipments from India may add to a global glut that’s helped to drive prices in New York to a three-year low, curbing global food costs. The monsoon is the main source of irrigation in Asia’s most-populous country after China, and rains this season have been the highest since 2001. There will be enough surplus sugar to allow for exports, according to Abinash Verma, director general of the Indian Sugar Mills Association.
“India has several millions tons of sugar in stocks and if the price is right we could see some or a lot of that sugar get exported,” said Charlotte Kingsman, a New Delhi-based analyst at broker and researcher Kingsman SA. “Indian exports can act as a cap on world prices as a result.”
Futures are heading for a third year of declines, the longest slump since 1992. Prices reached 36.08 cents a pound in February 2011, prompting farmers from Brazil to China to boost plantings. Raw sugar for delivery in October was 0.3 percent higher at 16.31 cents on ICE Futures U.S. at 4:48 p.m. in Mumbai yesterday. Futures tumbled to 16.24 cents on July 5, the lowest price since July 2010, extending losses to 17 percent this year.
Exports from India totaled 736,000 tons between Oct. 1 and July 4, said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd. Global supplies will be 4.7 million tons higher than demand in the 12 months starting in September, according to Kingsman SA, a unit of McGraw-Hill Financial Inc. (MHFI)’s Platts.
Inventories in India may jump 23 percent to 8 million tons on Oct. 1 from a year earlier as output exceeds consumption, Verma said. Imports climbed after global prices fell, prompting a panel of ministers last week to recommend an increase in taxes on overseas purchases of raw and refined sugar to 15 percent from 10 percent.
Indian processors imported 607,000 tons of raw sugar between Oct. 1 and July 4 for sale in the local market, according to Kumar.
“With good rains, a reasonable crop is expected and we don’t want sugar to come into the country from overseas as there is enough stockpiles,” Verma said.
The monsoon rainfall was 32 percent more in June than a 50-year average considered normal for the month and the highest since 2001, according to the India Meteorological Department. Northwest India, the main wheat, rice and sugar cane region, got 120 percent more rain than normal last month, it said.
“These rains will be helpful for the crop,” said G.S.C. Rao, chief executive officer of Simbhaoli Sugars Ltd. (SBSM) “Yields will increase.”
Sugar cane has been planted in 4.74 million hectares (11.7 million acres), 3.9 percent down from a year earlier, the Agriculture Ministry said June 28. Parts of Maharashtra and Karnataka, which together account for 45 percent of the country’s output, have faced drought because of below-average monsoon rains in the past two years.
A fall in cane area in Marathwada region in Maharashtra state will be compensated for by an increase in planting in the western parts of the state, the nation’s biggest producer The decline in Karnataka will be negated by higher sowing in Uttar Pradesh, said Sanjeev Babar, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd.
To contact the editor responsible for this story: James Poole at firstname.lastname@example.org