While major producing states like Uttar Pradesh and Maharashtra have lately seen robust cane production amid good rainfall, Tamil Nadu has been impacted by three straight years of drought. Making the matters worse, cane production in the state is expected to be lacklustre this year as well.
At present only 20 sugar mills are operating in Tamil Nadu, against 34 on December 31 last year. Cumulatively, they produced 170,000 tonnes of sugar as of the end of last calendar year, compared with 186,000 tonnes a year earlier, according to data from the Indian Sugar Mills Association (ISMA).
This year, we will see the lowest crop ever. Recovery has also been low because of rains. So, the production will drop further, says A Vellayan, executive chairman, Murugappa Group.
Even next year, the crop would either be at the same level or marginally higher. With consumption and production more evenly matched, sugar prices would likely remain stable at the level of Rs 33-34 a kg, Vellayan explains.
According to ISMA data, sugar prices have fallen by over 10 per cent since October 2017, but they do not reflect the fundamentals. Though the sugar production in October-December 2017 was higher than last year, sugar stocks of around 8.5 million tonnes as on December 31 was substantially lower than the 9.9 million tonnes as on December 31, 2016.
The closing balance as on September 30, 2018, is expected to be one of the lowest ever – as tight as last season, at around 4 million tonnes.