Trade sceptical over below-consensus India sugar output estimate

By David Brough

LONDON (Reuters) - Analysts are standing by 2015/16 Indian sugar production forecasts in a 26-27.5 million tonnes range despite a sharply below-consensus farmers' estimate that drove a rally in ICE sugar futures.

Analysts for Green Pool, Sucden and the International Sugar Organization (ISO) said they stuck to their 2015/16 Indian sugar output forecasts, well above a survey of around 900 farmers last week that estimated output at 23 million tonnes.

That estimate contributed to a rally of around 3 percent in ICE raw sugar futures on Friday.

Futures prices have since risen further, touching 15.78 cents a pound on Tuesday, a 10-month high, which dealers said was fuelled by data showing lower than expected sugar content in centre-south Brazil due to wet weather.

"It seems it (estimate) has not been taken too seriously by the trade," one European trade source said.

Emmanuel Jayet, an analyst with Sucden, said of the estimate, "We don't share that point of view. We are not ready to adjust our number on the basis of that view."

Sucden sees Indian sugar output in 2015/16 at 26-26.5 million tonnes, against Green Pool's estimate of 26.7 million and Platts Kingsman's estimate of 27.5 million, incorporating the impact of a weak monsoon.

Assessing output in number 2 producer India is important in the global sugar trade because it gives a clue as to India's export potential in 2015/16.

Tom McNeill, an analyst with Green Pool said: "We won't be revising down our India numbers at this stage."

He added, "On exports, we'll have to wait and see how the proposed programme is implemented."

Sergey Gudoshnikov, a senior economist with the ISO, said, "For the time being I'm not inclined to revise our projection of 27 million tonnes."

Given concerns over the El Nino weather pattern, the 2016/17 season looks challenging for the Indian sugar sector, and there remains a real possibility that output could be below consumption next year, the European trade source said.

Indian trade sources spoke of concerns over the impact of dry weather on output in 2015/16.

"India's sugar production could barely touch 25 million tonnes in 2015/16, as many farmers in Maharashtra are still reeling under the impact of the second consecutive drought," said Praful Vithalani, owner of brokerage Jagjivan Keshavaji.

Desperate farmers couldn't wait for mills to start crushing and decided to sell their produce as fodder.

India's government has forecast this year's sugar output at 26 million tonnes, nearly 4 percent lower than the estimate of the Indian Sugar Mills Association (ISMA).

(Additional reporting by Mayank Bhardwaj in New Delhi; Editing by David Evans)