Sugarcane acreage in India seen at four-year low on drought

Sugarcane decline in Indian output after three years of surpluses may boost imports and help stem the 51% slide in raw sugar futures in New York since reaching a three-decade high in February 2011

Sugarcane planting in India, the world's largest grower after Brazil, is set to fall to the lowest in four years as the worst drought in four decades scorches fields in the main producing region. Futures climbed.

The nation's 50 million cane farmers have planted the crop in 4.03 million hectares (9.96 million acres) as of May 8, 11 per cent less than the 4.55 million hectares a year earlier, according to farm ministry data. That's the lowest since the 2009-2010 season and below the government's target of 5.25 million hectares for this year, according to the ministry.

A decline in Indian output after three years of surpluses may boost imports and help stem the 51 per cent slide in raw sugar futures in New York since reaching a three-decade high in February 2011. Prices have fallen, as production from Brazil to Thailand and China increased and a global economic slowdown curbed demand.

"The drought certainly seems to be serious and will impact production for next year and India will certainly have to come back to the import market more," Michael McDougall, head of the Brazil desk at broker Newedge Group in New York, said by phone yesterday. "The potential for imports could rally. It will certainly support prices."

Futures have fallen 10 per cent this year, extending two years of declines. A third year of losses would mean the longest price slump since 1992.

Worst drought
The cane acreage in Maharashtra state, parts of which are facing the worst drought in more than four decades, plunged to 511,000 hectares as of May 8 from 937,000 hectares a year earlier, according to the farm ministry. Farmers in Uttar Pradesh, the largest grower, planted the crop in 1.92 million hectares, compared with 1.95 million hectares in 2012-2013, the ministry said.

Parts of Maharashtra and Karnataka, which together account for 45 per cent of India's output, have faced drought in the past 24 months because of below-average monsoon rains. Sugar output may slump to 4 million tonnes in 2013-2014 from an estimated 8 million tonnes this season, according to Pandurang Shelke, joint director at the Sugar Commissionerate of Maharashtra.

Crucial monsoon
India's sugar production may drop for a second year to between 22 million tonnes and 23 million tonnes in 2013-2014 from 24.6 million tonnes this season, according to Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories. The harvest will fall to 23 million tonnes, according to a Bloomberg survey published March 28. "The world will pay close attention to the monsoon to get a clearer picture of what the crop might be like," said Charlotte Kingsman, an analyst in New Delhi at Kingsman SA, a Lausanne, Switzerland-based research company. She estimates output to drop to 22.25 million tonnes in 2013-2014 from 24.8 million tonnes this season.

Monsoon rainfall, which accounts for more than 70 per cent of India's annual rain, will be normal this year, the India Meteorological Department said April 26. Rain will be 98 per cent of a 50-year average of 89 centimetres (35 inches) in the four months through September, it said.