Another year of sugar supply glut on the cards

India’s sugar production is likely to rise three-five per cent in the ensuing crushing season (October 2014-September 2015), owing to favourable climatic conditions. This is despite the one per cent fall in cane sowing area.

“Owing to the erratic monsoon and difficulties in making a correct assessment of its impact as of now, the first advanced estimate for sugar production for the 2014-15 season is 25-25.5 mt,” said a statement by the Indian Sugar Mills Association (Isma). For next year, the estimated domestic consumption stands at 24 mt, 1-1.5 mt less than the output.

Factoring in an estimated 7.5 mt of carry-over stock from this season, it is likely there will be another surplus-production year, resulting in depressed prices through next year.

Production in Maharashtra is estimated to rise 20 per cent to 9.3 mt next year from 7.71 mt this year. By contrast, output in Uttar Pradesh is estimated to fall eight per cent to six mt.

Towards the end of the current season, mills will have about 2.5 mt of exportable surplus. Isma estimates the total area under cane this year at 5.294 million hectares, one per cent lower than last year.

In 2013-14, mills dispatched 2.11 mt. Of this, 55 per cent was raw sugar and the rest refined/white sugar. Under the export incentive scheme, mills executed sugar export orders of about 700,000 tonnes.

Isma has reiterated its demand that the export incentive scheme for raw sugar be continued in the 2014-15 season. It said it was also important to explore new avenues to dispose of surplus sugar with government assistance, including incentives/subsidies (a billion litres of additional ethanol procurement can reduce 1.7 mt of surplus  from the market). This would provide the sector better cash flow and companies could provide timely payments to farmers next season, Isma said.