Sugar prices to decline as output likely to climb 5%

Sugar production in India, the world’s second-biggest grower, may advance for a third year as farmers increase plantings, pushing down global prices.

The harvest will increase at least 5 percent in the 12 months starting October 1 from 25 million tonnes this year, boosting the country’s surplus, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, said in an interview today. Rising production and exports are likely to pressure futures, said Abah Ofon, an agricultural analyst at Standard Chartered in Singapore.

Declining prices may curb global food costs that the United Nations estimates advanced to a record in February. Rising prices contributed to conflict in Libya, riots in the Middle East and the ousting of leaders in Egypt and Tunisia. Sugar will drop 18 per cent to 20 cents per pound in the next six months, according to Goldman Sachs Group Inc. in a report April 12. The sweetener traded at 24.38 cents in New York today.

“There will be more surplus available for export next year,” said Kumar, whose group represents 50 per cent of output. “We will be in a more comfortable situation to export.”

Cane planting is in progress in India and the area may increase by five per cent from 4.89 million hectares (12 million acres) the previous year, said Abinash Verma, the director general of Indian Sugar Mills Association, in an interview today. The crop will be harvested starting in October.

UTTAR PRADESH
Farmers in Uttar Pradesh, the biggest cane grower, received an average Rs 210 a quintal this year, 51 per cent more than the federal government’s minimum benchmark price of Rs 139.12, said Verma.

The cane harvest probably climbed 17 per cent to 340.54 million tonnes this year from 292.3 million tonnes a year ago because of rising prices, the farm ministry said this month. Increased supply prompted the government to allow 500,000 tonnes of exports under the so-called open general license plan. The government may publish rules for the shipments on April 15, said Kumar.

“Even if you see supplies grow by the same amount that they grew this year, it’s going to have a greater impact on prices” as stockpiles are building up, Ofon said. “It will give more comfort to exporters such as India to sell more.”