Sugar Mills in India Reduce Output Estimate as Rains Hurt Yields

March 6th, 2014


Category: Sugar

(Bloomberg) – Sugar production in India, the world’s largest grower after Brazil, will tumble to the lowest in four years after excessive rains cut cane yields, a mills’ group said.

Output may total 23.8 million metric tons in the year ending Sept. 30, down 4.8 percent from a September estimate of 25 million tons, the Indian Sugar Mills Association, or ISMA, said in an e-mailed statement today. The estimate compares with 23.5 million tons predicted by traders and analysts in a Bloomberg survey last month and 25.1 million tons in 2012-2013.

Lower production will probably trim the highest Indian inventories in five years and extends gains in raw sugar futures in New York. The commodity entered a bull market last week, climbing more than 20 percent from a January low, as dry weather threatened crops in Brazil, also the world’s top exporter.

Cane yields in Uttar Pradesh, India’s biggest grower, are seen lower after heavy rains in eastern parts of the state damaged crops, while a delay in crushing by mills prompted some farmers to sell their harvest to makers of alternative sweeteners to vacate land for wheat planting, ISMA said.

Production in Uttar Pradesh may total 6.6 million tons, down 14 percent from the September estimate of 7.7 million tons, ISMA said. Output in Maharashtra may be 7.8 million tons, unchanged from the previous forecast, while output in Tamil Nadu was cut by 100,000 tons to 1.5 million tons, ISMA said.

Delayed Crushing

Northwest India, a region including Uttar Pradesh, got 9 percent more monsoon rain than normal, according to the India Meteorological Department. Cane crushing was delayed this season because of a shutdown by mills including Bajaj Hindusthan Ltd. (BJH) and Balrampur Chini Mills Ltd. (BRCM), demanding aid from the government to pay state prices to growers.

Exports from India may jump to 2 million tons to 2.2 million tons this season from 345,000 tons a year earlier as gains in global prices and a state subsidy help mills compete with supplies from Brazil and Thailand, according to Rahil Shaikh, managing director of ED&F Man Commodities India Pvt.

Futures rallied 14 percent in February, the biggest monthly advance since June 2011, as dry weather in Brazil depleted this year’s cane crop. The price climbed 20 percent from the 43-month closing low of 14.74 cents a pound on Jan. 29. The contract for May delivery rose 0.8 percent to 18.38 cents on ICE Futures U.S. today.

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