Sugar season may end with surplus despite falling output: ISMA

Sugar body's projection should soothe sentiments, as concerns were raised earlier, over falling water levels following the drought

The current sugar season is expected to end with a carryover stock of seven million tonnes, despite an estimated 10 per cent drop in production during the current sugar season (October '15 to September '16) to a little over 25 million tonnes, due to drought in some producing states. There still will be a carryover stock of seven mt, Indian Sugar Manufacturers Association (Isma) said on Monday.

ISMA's projection should soothe market sentiments, as last week some prominent players have raised concerns that the current year's drought has resulted in water levels falling sharply, expecially in the sugar producing regions of Maharashtra. This will badly affect sugarcane crop for 2016-17. There were fears that in such a scenario, India may become a net importer of the commodity.

India annually consumes 25-26 million tonnes of sugar a year. This year, exports are expected to be around 1.5 million tonnes.

ISMA said, "Considering the number of sugar mills that are in operation as on 30 April 2016 and the cane availability in these (sugar producing) states, production in the current season is expected to be just above 25 million tonnes by the end of September 2016. However, with the carry forward of 9.08 million tonnes from the previous season, estimated domestic consumption of 25.6 million tonnes and exports of 1.5 million tonnes, sugar mills would still have a carryover stocks of seven million tonnes at the end of the current season."

There are concerns about the possibility of sugar prices rising. The government has asked states to impose stock limits as prices tend to rise sharply when the season is mid way. An industry official said that after the stock limit on pulses, a very large importer shifted to other commodities. One trader is understood to be seating on a huge stock of sugar. A big-time pulse importer is also said to be under the I-T Department lens. ISMA has been saying that sugar prices have just come above cost and hence should not be considered high.

There are different opinions of excess sugar stock in the market, which is leading to worries about hoarding. Praful Vithalani, Chairman, All India Sugar Trade Association, recently took a delegation to the Prime Minister's Office (PMO) and represented that stock-in-trade is around 1.2 million tonnes, which is equivellent to 15-20 days requirements. He said the stock with the mills is estimated around 16 million tonnes.

From the beginning of the current 2015-16 season and till 30 April 2016, sugar mills have produced 24.6 million tonnes of teh sweetener, down 11 per cent as compared to 27.6 million tonnes produced in the 2014-15 sugar season, said a note from ISMA.

Sugar crushing operations for 2015-16 in most parts of the country have come to an end on 30 April 2016. Forty-eight sugar mills are still continuing their crushing operations as on date, as against 97 mills that were operating on the same date last year. Of these 48 sugar mills that are still operating, 35 are in Tamil Nadu. The other mills are in Karnataka, Maharashtra and Haryana, and may close in the next few days.