Record Sugar Output in India’s Top Grower May Curb Imports

Sugar output in India’s biggest producer may surge to a record next year even as a drought threatens planting in some areas, helping the country avert large imports, a producers’ group said.

Production in the northern state of Uttar Pradesh may climb at least 13 percent to 9 million metric tons in the year beginning Oct. 1, from an estimated 8 million tons this season, said C.B Patodia, president of the Uttar Pradesh Sugar Mills Association. Farmers are set to boost planting by about 12 percent because of record cane prices, he said.

A bigger harvest in Uttar Pradesh may make up for a decline in output from Maharashtra and Karnataka states, where water shortages have cut cane planting. While India’s production next year may drop from 24.3 million tons this year, a bigger inventory will help India meet demand without imports, Patodia said. Futures have slumped to the lowest in 2 1/2 years in New York on speculation of a global surplus for a third year.

“Output will not be lower than demand,” Patodia said in an interview in New Delhi. “What is the need to import when we will have an opening balance of 8 million tons to 8.5 million tons next season?”

Demand is estimated at 22.5 million tons this year, according to Indian Sugar Mills Association. Exports have come to a halt after the slump in global prices and a rally in local rates to a 20-month high in August. Refiners have contracted to import about 919,000 tons of raw sugar since Oct. 1, according to the association known as ISMA.

Import Parity

“Millers and traders will be happy to import if they get sugar cheaper outside,” said Subhranil Dey, senior research analyst at New Delhi-based SMC Comtrade Ltd. “Export and import will depend on price parity and also the policy decision of the government.”

Raw sugar for May delivery on ICE Futures U.S. in New York rose 0.8 percent to 18.04 cents a pound today. Futures fell to 17.67 cents on Feb. 15, the lowest since August 2010.

Farmers in central and eastern regions of Uttar Pradesh may increase the area under the crop by as much as 25 percent after cane prices were increased this year, Patodia said. The state government raised the cane price 17 percent to 280 rupees ($5.13) per 100 kilograms for the 2012-2013 season. Mills in India must pay at least the government-set price. The area totaled 2.43 million hectares (6 million acres) in 2012-2013, according to ISMA.

“Farmers are shifting from rice to sugar cane as the government has provided subsidy on farm inputs such as seeds, harvesters,” Avdhesh Mishra, president of the Cane Committees’ Association, said by phone from Gorakhpur in Uttar Pradesh. Mishra, who’s been growing cane for the last 25 years, said he plans to increase planting from 6 hectares to 7.5 hectares.

“The only problem is that we are not getting sufficient quantity of seeds which will improve yield and recovery,” Mishra said.

Before it's here, it's on the Bloomberg Terminal.