India's Top Sugar Producer May Cut Exports as Output Slumps

  • Maharashtra mills' output drops after dry weather hurt crops
  • Mills want exports to be linked to this year's production

A farmers stands on harvested sugar cane in Uttarpradesh.

Photographer: Prashanth Vishwanathan/Bloomberg

Mills in India’s biggest sugar producing state want the government to relax its mandatory export target as dry weather cuts the cane harvest and curbs planting of the new crop.

Producers want shipments to be linked to this year’s output rather than the average of the past three years, Sanjeev Babar, managing director of the Maharashtra State Cooperative Sugar Factories Federation, said by phone from Mumbai on Thursday. The federal food ministry wanted about 190 factories in Maharashtra to ship 1.39 million metric tons in the year that began on Oct. 1.

Sugar prices in New York posted the first annual gain in five years in 2015 after El Nino cut the sucrose content in the sugar cane grown in Brazil, the world’s biggest supplier, as well as yields in India and Thailand. Output in India, the second-biggest producer, will probably fall short of demand for the first time in six years, SGS SA, a researcher, said in November.

“The government should consider the fact that there is scarcity of water in Maharashtra this year and a lot of factories can’t produce as per their normal trend,” Babar said. “We are asking the government to fix the quota as per this year’s situation.”

Straight Deficits

Global output will fall 4.3 percent to 178.9 million tons in the 2015-16 season, which runs from October to September in most countries, trailing demand by as much as 8.2 million tons, according to trader Czarnikow Group Ltd. A shortfall is expected for the season after that, according to researcher Platts Kingsman SA and the London-based International Sugar Organization. The last time the sugar market had two straight deficits was in 2010.

Raw sugar for March delivery was little changed at 14.47 cents a pound on ICE Futures U.S. in New York on Thursday. Sugar prices in Mumbai have surged 46 percent since the end of June, after the government granted interest-free loans to mills and offered a subsidy on exports.

Prime Minister Narendra Modi’s government in September ordered mills to compulsorily export 4 million tons of sugar in the 2015-16 season and offered a subsidy on exports. The shipments are meant to enable mills to clear money owed to the nation’s 50 million cane growers.

Production in Maharashtra may drop 24 percent to as low as 8 million tons
this season from 2014-15, Babar said. The the first back-to-back shortfall in monsoon rain in three decades in India is curbing planting of the new crop and sugar output in 2016-17 season may further slide to 6 million tons, he said.

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