India Sugar Output to Miss Forecast as Yields Fall

By Pratik Parija

Jan. 16 (Bloomberg) -- India, the world’s second-biggest sugar maker, may produce 1.2 million tons less this year than forecast last month because of lower yields in the main cane growing state, likely tightening global supply.

Production in the year ending Sept. 30, 2009, may total 18 million metric tons, compared with 19.2 million tons forecast in December, S.L Jain, director general of the Indian Sugar Mills Association, said in an interview today.

Lower Indian output may widen a global deficit forecast at 5.8 million metric tons in the 2008-09 season by Czarnikow Group Ltd., supporting New York sugar prices that have risen 9 percent in the past three weeks. The South Asian country may permit duty- free imports of raw sugar to boost domestic supplies, Agriculture Minister Sharad Pawar said this week.

“This will have a positive impact on global prices as the shortage will lead to imports,” said Harish Galipelli, head of research at Karvy Comtrade in Hyderabad, a southern Indian city.

Raw-sugar futures for March delivery rose 4.6 percent to 11.96 cents a pound on ICE Futures U.S. in New York yesterday, the most since Dec. 8. Sugar was the second-biggest gainer in 2008 on the Reuters/Jefferies CRB Index.

Sugar mills’ shares rose in Mumbai trading. Bajaj Hindusthan Ltd., India’s biggest sugar maker, gained as much as 7.6 percent to 59.5 rupees. Balarampur Chini Ltd., the second-biggest, added as much as 6.3 percent to 53.25 rupees. Shree Renuka Sugars Ltd. gained as much as 5 percent to 69.85 rupees.

Buffer Stocks

Production may total 20 million tons in year to September, down from 26.4 million tons a year ago, Pawar said last month. Output may be 19.5 million tons, a group in Maharashtra, the second-biggest cane-growing state, said Jan. 6.

The South Asian nation will need to buy at least 3 million tons to maintain a “decent stockpile” at the end of the year, said Amol Tilak, an analyst at Kotak Commodity Services in Mumbai.

India hasn’t imported sugar in three years.

Sugar cane output may fall to 294.66 million tons in the year ending June, 14 percent less than last year, as farmers shifted to crops such as grains, the farm ministry has said.

In Uttar Pradesh, the nation’s biggest cane-growing state, farmers used Priponil, a pesticide, to increase the per hectare output, Jain said. The chemical instead lowered the sugar content in the cane, paring the recovery rate, he said.

“The pesticide had a negative impact on sugar accumulation and maturity of the crop due to hormonal effect,” he said.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.