Sugar carryover stock to hit seven-year low

Import may slump to nil if the government imposes Customs duty of 15-25%.

Despite a second upward revision in output estimates this year, sugar’s carryover stock is likely to hit a seven-year low at the start of the 2010-11 crushing season (October-September).

Data compiled by Edelweiss Research estimate that India’s total opening stock of the sweetener will be 2.9 million tonnes (mt) for the season beginning October 2010, the lowest in seven years.
 

BALANCE SHEET SUGAR DEMAND-SUPPLY OUTLOOK (MILLION TONNES)
Year ending Sept	’05	’06	’07	’08	’09	’10	’11
Opening stock	8.5	4.9	3.4	9.2	8.7	3.2	2.9
Production	12.7	19.3	28.4	26.4	14.5	18.5	25.0
Imports	2.1	0.0	0.0	0.0	3.0	5.0	0.0
Consumption	18.5	19.6	20.8	22.0	23.0	23.8	24.6
Exports	0.0	1.1	1.7	4.9	0.0	0.0	0.0
Closing stock	4.9	3.4	9.2	8.7	3.2	2.9	3.3
* Source : Edelweiss research

This may, however, rise marginally to 3.3 mt by the next season, that is, October 2011.

The Indian Sugar Manufacturers Association (Isma) has estimated India’s sugar output during the ongoing crushing season, 2009-10, at 18.5 mt, a significant upward revision from the previous estimate of 15.8 mt at the beginning of the season.

Total import of refined and white sugar during the current season is anticipated at 5 mt as against 3 mt last year.

But, import is forecast to slump to nil next year, if the government goes ahead with its plan to impose a Customs duty of 15-25 per cent.

Agriculture Minister Sharad Pawar has already hinted that a final decision to this effect will be taken within two to three weeks.

Since the world’s largest producer, Brazil, is also having a supply glut, global sugar prices have already entered a downward cycle.

Edelweiss Research has forecast that India will become self-sufficient in sugar in 2011 and have a surplus by 2012, with an estimated output of 29 mt as compared to 25 mt in the previous season.

Currently, white sugar manufactured by domestic mills is being held in inventory at a cost of production of Rs 25-27 a kg.

If the sugar price dips below this level, sugar mills will incur losses, which in turn will result in higher arrears, impacting farmers.

In this context, the government will try to maintain sugar prices above these levels to protect farmers.

Recently, when the sugar price dipped to Rs 25 a kg, the government shifted back from weekly sale quota to a fortnightly system. It is currently following a monthly release mechanism to sugar mills.

This helped sugar prices move up to Rs 29 a kg. Also, the government has plans to relax sugar stock norms for bulk consumers.