- India net-imports seen about 3 million tons in 2016-17: Haque
- Output in India forecast about 23.5 million tons next season
Dry weather that hurt cane crops in India will turn the world’s second-largest sugar producer into a net-importer as production falls next season, according to ED&F Man Holdings Ltd.
India will probably import about 3 million metric tons of sugar more than it will export in the 2016-17 season that starts in October, said Kona Haque, head of research at the London-based trader. Two years of dry weather will limit yields and reduce output by more than 6 percent, according to estimates from ED&F Man, which trades about 9 million tons of sugar a year.
"Two back-to-back dry monsoon seasons really didn’t help cane yields,” Haque said. “It didn’t enable farmers to plant new cane either, particularly in Maharashtra, which is where you will probably see the biggest losses."
Millers in India will produce just under 23.5 million tons of sugar in 2016-17, down from 25 million tons this season, Haque said, citing preliminary forecasts. With consumption estimated at about 26.5 million tons, the nation needs inbound shipments to bridge the gap, she said.
Raw sugar futures traded in New York climbed 42 percent over the past year as traders forecast global demand to overwhelm supplies this season and the next. Two seasons of shortages will deplete the surplus stockpiles that accumulated from 2010 to 2015, according to the International Sugar Organization. A shortfall in India could further support prices.
Forecasts for above-average monsoon rains this season won’t be enough for the next crop to recover, Haque said. The monsoon, which waters about half of all of India’s crops, will be will be 106 percent of the 50-year average of 89 centimeters (35 inches), according to the government. Skymet Weather Services Pvt., a New Delhi-based private forecaster, expects 109 percent of the average, bringing the most rain since 1994.
"This season, we will probably get quite a bit of monsoon rains," Haque said. "That’s going to benefit the 2017-18 crop, but it’s not going to be enough to fix the 2016-17 crop."
The Indian government has already showed signs it’s worried about sugar supplies by withdrawing export subsidies last month. Traders are watching the government’s next move, which could be the removal of import taxes on raw sugar that would boost global demand and potentially support prices.
"This India story is something to watch out for," said Haque. "Recent government policy seems to be moving in a way that suggests they will take some measure to address this domestic shortage."