India sugar imports to prove bigger than forecast

(AgriMoney) – India’s imminent cane crushing season will produce more sugar than many commentators have forecast, although rising consumption, and support for exports, will mean a rise in imports nonetheless, US officials said.

The US Department of Agriculture bureau in New Delhi pegged Indian sugar output in 2014-15, for which cane crushing will begin in earnest next month, at 27.25m tonnes.

While 650,000 tonnes below the USDA’s official forecast, and a reflection of lower plantings hopes after a weaker-than-average monsoon, the bureau’s estimate remains above that of many other commentators.

India’s government has pegged production at 24.5m-25.0m tonnes, and the Indian Sugar Mills Association at 25.0m-25.5m tonnes, while analysis group Platts Kingsman sees output at 26.3m tonnes.

‘Local supplies will constrict’

The bureau nonetheless pegged India’s imports in 2014-15, starting this month, at 1.0m tonnes, above an official USDA forecast for minimal volumes this season.

The forecast reflects ideas of the country’s sugar consumption continuing to rise by some 1m tonnes a year, hitting a record 27.0m tonnes in 2014-15 – only just short of production.

Meanwhile, exports will remain at last season’s level of 1.5m tonnes, assuming the government maintains a programme of subsidising shipments.

As a result, “local supplies will constrict, as consumption levels continue to increase,” the bureau said.

It added that imports in 2013-14 too were, at 850,000 tonnes, far higher than the USDA has acknowledged too, noting that prices in the country have, to some extent, bucked the downward world trend, hitting up to $610 a tonne in August.

In the newly started season, sugar prices “will remain firm, due to tighter supplies”.

Surplus question

The comments come amid a continued focus by sugar investors on the potential for demand to erode large world sugar stocks left over from four successive seasons of world production surplus.

The extent of supplies pressed New York sugar futures below 14 cents a pound last month for the first time in four years.

India is the world’s top sugar consuming country, although an apparent waning in its historic sugar cycle, blamed by many largely on excessive sector regulation, has meant that it has not since 2009-10 seen a big output shortfall, fostering high prices which attracted imports of more than 2m tonnes.

A year later, the extra production encouraged by higher prices meant a surplus which lifted exports nearly to 4m tonnes.

‘Cane is in good condition’

Platts Kingsman sees India’s sugar consumption at some 26.5m tonnes in 2014-15, in line with output, although it highlighted the potential for an upgrade to its production figure.

“Cane is in good condition thanks to irrigation that helped offset periods of insufficient rainfall,” the Swiss-based analysis group said.

Cane area “should be higher in Maharashtra and Karnataka”, offsetting declines in Uttar Pradesh, thanks to arrears by sugar mills in paying cane growers, and in Tamil Nadu, thanks to water shortages.