India Sugar Output Falls 21% as Mills Delay Crushing

By Thomas Kutty Abraham

Dec. 8 (Bloomberg) -- Sugar production in India, the world’s second-biggest producer, fell 21 percent in the first two months of the crop year that began Oct. 1 after farmers in the biggest cane-growing states delayed crushing.

Output was 1.4 million tons in October and November, down from 1.77 million tons a year ago, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said in a phone interview from New Delhi.

Lower output may reduce exports from the South Asian nation, worsening a global shortfall and bolstering a 13 percent gain in raw sugar in New York. Global sugar supply will be 5.8 million tons short of demand in the 2008-09 season as tightening credit and weaker prices spur producers to restrain output, Czarnikow Group Ltd. said last week.

Raw-sugar futures for March delivery rose as much as 4.1 percent, to 11 cents a pound today in after-hour electronic trading in New York’s ICE Futures. It traded at 10.95 cents at 1:23 p.m. in Mumbai.

Harvesting in the western Maharashtra state, India’s biggest producer, was delayed by three weeks because of rains. Mills in the northern Uttar Pradesh state, the second-biggest, held back processing cane after a price dispute with the state government.

“Processing is on in full swing now in Uttar Pradesh,” said Kumar.

Uttar Pradesh state government in October ordered mills to pay farmers 140 rupees ($2.8) for 100 kilograms (220 pounds) of cane, up from 125 rupees a year ago, prompting mills to delay crushing as they challenged the order. A court in Allahabad may give its verdict this week on the petition, Kumar said.

Production this year may drop 25 percent to 20 million tons and exports may drop to about 800,000 tons from almost 5 million tons last year, he said.

Sugar cane production may decline to 294.66 million tons in the year ending June 30, 13.5 percent less than last year, after farmers shifted to crops such as grains, according to the farm ministry.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.