Sugar production in India will exceed demand for a sixth year as record cane prices encourage farmers to stick with the crop.
Output will total 28 million metric tons in the 12 months starting Oct. 1, topping domestic demand provisionally seen at 25.2 million tons, the Indian Sugar Mills Association said in an e-mailed statement on Friday. Production is estimated at a near-record 28.3 million tons in 2014-15, it said.
Inventories will expand to 10.2 million tons by Oct. 1, the highest in seven years, after production outpaced demand and a slump in global prices slowed exports, the association estimates. With another bumper crop in the making, mills may increase exports to more than 1 million tons this season, according to Yatin Wadhwana, managing director of Sucden India Pvt. Futures in New York slumped to a six-year low this week.
The federal government has increased the benchmark cane price 58 percent in the past five years to 220 rupees per 100 kilograms (220 pounds), official data show. State governments often set a higher rate to help about 50 million farmers to earn more as they form a powerful voting bloc.
Factories owed farmers about 181 billion rupees ($2.8 billion) as of June 15 after the glut forced them to sell the sweetener below the cost of production, according to the mills association.