Sugar output may dip 35% on low acreage

A dramatic decline in cane acreage coupled with heightened tension between farmers and mills over the genesis of state advised price of sugarcane (SAP) resulted in 35 per cent lower sugar output estimates this sugar year (October-September).

Sugar output this year is estimated to nosedive to approximately 17 million tonnes as against the previous forecast of 18 million tonnes and last year’s output of 26.3 million tonnes. Sugarcane output, meanwhile, is set to decline 14.71 per cent to 290 million tonnes this year from the record 340 million tonnes last year, according to data collated by Indian Sugar Mills Association (ISMA).

However, the sweetener lost acreage area 12 per cent to an estimated 4.4 million acres from 5 million acres last year due to farmers shifting to more remunerative crops especially to cotton, pulses and edible oils. Surprisingly, prices are still holding low as the demand of 22.5 million tonnes can comfortably be met through 8.5 million tonnes of carry forward stocks of last year.

For mill delivery in Vashi, sugar plunged Rs 30-40 so far this week with S30 variety traded between Rs 2,025-2,050 per quintal while M30 ranged between Rs 2,080 -2,150 per quintal on Thursday. Naka delivery of sugar also slipped into similar range with S30 quoted between Rs 2,080-2,100 per quintal and M30 between Rs 2,010-2,180 per quintal.

“With the government allowing imports of both raw and white sugar, prices are likely to remain under pressure. Sugar prices may decline another

Rs 150 per quintal in a month,” said Rajendra Shah of Vashi-based trading firm Hitendra Kumar Thakarshi & Co.

Meanwhile, most of the sugar mills in Maharashtra and Uttar Pradesh, the two major sugar producing states have started winding up crushing for this year and almost all crushing mills will be closed down latest by March 15, Shah said. Farmers are realising better returns on their cane from jaggery units than sugar mills. Therefore, they are diverting the remaining sugarcane for this season to jaggery units resulting in huge shortage of cane for sugar mills.

The latest Fitch Ratings report on sugar said, “With sugar being an essential commodity and regulated by the government, prices are expected to remain range-bound .”