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| Sugar output may jump 25% on plantings |
| Bloomberg / Mumbai Mar 14, 2009, 00:40 IST |
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Sugar output in India, the world’s second-biggest producer, may rebound by 25 per cent next year as farmers boost sugarcane plantations to benefit from a rally in prices, reducing the nation’s reliance on imports.
The production may increase to 20 million metric tonnes in the year beginning October 1 from 16 million tonnes this year, S L Jain, director general of the Indian Sugar Mills Association, said in a phone interview. The country may still need to import sugar as the demand is increasing, he said.
A rebound in the Indian output may cool a rally in global prices. Raw sugar has climbed 11 per cent this year in New York and refined sugar has advanced 27 per cent in London on expectations of a widening shortfall in global supplies.
“Farmers are back to planting sugarcane again, thanks to the good prices they are getting this year,” Jain said from New Delhi. “However, increased production will still not be sufficient to meet the rising demand.” The country’s sugar consumption next year may total 24 million tonnes compared with 23.5 million this year and stockpiles at the start of next season may be 1.5 million tonnes, Jain said.
“India will have to import sugar next year,” he said yesterday. “But 'how much?’ That will depend on prices.”
Raw-sugar futures for May delivery rose as much as 0.5 per cent to 13.16 cents a pound in after-hours trading on ICE Futures US in New York today.
Mills, including Shree Renuka Sugars, may import 1.5 million tonnes of raw sugar during the year to September 30 to fill a gap in the output, Managing Director Narendra Murkumbi said yesterday.
Last month, the country allowed duty-free imports of raw sugar until September for processing and local sale.
Buyers must export a similar quantity of refined sugar in two years. Mills have bought 800,000 tonnes already, Jain said. The mills association’s forecast of a recovery in output echoes comments from India’s Agriculture Secretary T Nanda Kumar, who said last month that the farmers may increase the area planted with sugarcane because of higher prices. Sugar on the National Commodity & Derivatives Exchange Ltd jumped to a record Rs 2,204 per 100 kg on February 20 on lower output this year. April delivery sugar fell as much as 1.8 per cent today to Rs 2,076, the lowest in more than a month. The most active contract has gained 32 per cent in the past year. India’s cane production may drop 17 per cent to 290.5 million tonnes in the year to June as farmers shift to grains, the farm ministry said February 12.
The country’s government should allow mills to sell their entire produce at market prices to enable them to pay farmers a remunerative rate for supplying cane, Jain said.
Sugar producers can sell 90 per cent of their output at market rates, while the government typically fixes the quantity and time of the sale every month. Producers must sell 10 per cent to the government at below-market prices for resale to the poor.
“Why should the industry subsidise the government welfare programme,” Jain said. “The government should buy the sugar in the open market and encourage more production to achieve sustained self-sufficiency.”
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