India’s Sugar Production to Drop More Than Forecast

By Pratik Parija

Feb. 27 (Bloomberg) -- India, the world’s second-biggest sugar maker, may produce 2 million metric tons less this year than previously forecast because of lower harvests in all the main growing areas, likely tightening global supply.

Output in the year to September may total 16 million tons, compared with 18 million tons estimated last month, S.L Jain, director general of the Indian Sugar Mills Association, or ISMA, said in an interview today. Production may be 16.5 million tons, farm minister Sharad Pawar said this week.

Lower-than-expected output in the South Asian country may worsen a global production deficit that’s forecast by Barclays Capital at 9.2 million tons in the year ending September. Sugar is the best-performer this year on the UBS Bloomberg CMCI Index on forecasts India, also the biggest consumer, may import for the first time since the 2005-06 season.

“Output will be lower than the 16-million ton forecast,” N. Ramanathan, Managing Director of Ponni Sugars (Erode) Ltd., said after a meeting of producers in New Delhi today. “Sugar recovery has been lower in the biggest sugar-producing states.”

Raw-sugar for May delivery gained as much as 3.8 percent to the highest in almost five months on ICE Futures U.S. yesterday. Futures have gained 18 percent this year.

Mills may import 1.5 million tons of raw sugar to fill a gap in output, Jain said. That compares with 2 million tons estimated by Pawar, and between 1 million to 1.2 million tons forecast by Balrampur Chini Mills Ltd. and Sree Renuka Sugars Ltd., India’s biggest producers of the sweetener.

Net Buyer

India may be a net importer of 2 million to 3 million tons after net exports of 4.9 million tons in the previous year, said Nicholas Snowdown, a commodities analyst at Barclays in London, said in a report yesterday.

India last week allowed duty-free imports of raw sugar until September for processing and sale locally. Buyers must export a similar quantity of refined sugar in two years. Mills have bought 700,000 tons already, Jain said today.

Total output slid to 11.6 million tons in the Oct. 1-Feb. 15 period, from 14.44 million tons in the year-ago period, ISMA said. India produced 26.4 million tons of refined sugar last year.

Sugar output in Maharashtra, the nation’s biggest producer, may drop 44 percent to 5.13 million tons in the year to Sept. 30, while production in Uttar Pradesh, the second-largest, may fall 37 percent to 4.6 million tons, ISMA said.

Cane production may drop 17 percent to 290.5 million tons in the year to June as farmers shift to grains, the farm ministry said Feb. 12. Insufficient supplies of cane meant that 311 mills were running on Feb. 15, compared with 503 a year ago, ISMA said.

Indian Mills held 11.63 million tons on Feb. 15, 16 percent lower than a year earlier, the producers’ group said.

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