Production may total 26.25 million metric tons in the
marketing year that began Oct. 1, according to a survey of 866
farmers across six states by Geneva-based SGS SA for Bloomberg
News. That’s the highest since 26.34 million tons in 2011-2012,
according to Indian Sugar Mills Association data. The group
forecasts output of 25 million tons to 25.5 million this season
with domestic demand of 24.7 million tons.
With output exceeding demand for a fifth year, India may
need to subsidize exports to reduce stockpiles, potentially
extending a global glut. Futures in New York plunged 55 percent
since reaching a three-decade high in 2011 as farmers worldwide
boosted sowing. Slumping prices threaten to widen losses at
Indian mills as they struggle to pay farmers near the record
cane prices ordered by the states.
“If India does subsidize exports, the world market will
stay depressed for some time,” Tom McNeill, a director at Green
Pool Commodity Specialists Pty, said in an e-mail. “There will
be a further addition to sugar stocks in India if they do not”
incentivise exports, he said.
India gave a subsidy for production and exports of raw
sweetener in February to help mills pay farmers for cane, a move
opposed by Brazil and Thailand. The incentive of 3,371 rupees
($55) a ton wasn’t extended beyond September, the Food Ministry
said. Exports have ground to a halt since then because of low
global prices, leaving stockpiles of 7.5 million tons at the
start of October, according to the mills association.

Price Slump

Futures in New York, which reached a three-decade high of
36.08 cents a pound on Feb. 2, 2011, traded at 16.10 cents
yesterday. The International Sugar Organization estimates a
global surplus of 1.3 million tons in the 12 months started Oct.
1, the fifth straight annual glut.
The cane harvest in India will jump 12 percent to 392.2
million tons this season, according to the SGS survey conducted
between Oct. 2 and Oct. 20 across Uttar Pradesh, Maharashtra,
Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh states. About
65.4 percent of cane may be crushed to make sugar, according to
SGS, which used the average extraction rate of 10.24 percent
between 2000-2001 and 2012-2013 reported by the country’s
cooperative producers. The rest will be used for livestock feed,
seeding and jaggery, a local sweetener, SGS said.
SGS correctly predicted 2013-2014 production in India. Its
survey estimate of 24.42 million tons almost matched the final
output figures of 24.55 million tons from the government and
24.39 million tons from the mills.

‘Favorable Weather’

“The crop in Maharashtra is huge and that will assure a
large Indian harvest,” said Mark Oulton, global agricultural
market research manager with SGS, from Wilkes-Barre,
Pennsylvania. “Weather has been quite favorable throughout the
country. The overall Indian production could have been larger if
some farmers hadn’t shifted to rice in Uttar Pradesh.”
While farmers planted 7.6 percent more acres to the crop
being harvested in 2014-2015, yields may increase 4.2 percent,
the survey showed. The crop area jumped 33 percent in
Maharashtra, 20.2 percent in Karnataka and 13.7 percent in
Gujarat, while it fell 3.1 percent in Uttar Pradesh from a year
earlier, SGS said.
The cane harvest in Maharashtra, the biggest sugar
producer, will probably climb 45.7 percent, with 65 percent of
the crop in normal condition, compared with 57 percent a year
earlier, according to the survey. Reporting of normal crop
conditions jumped to 82 percent in Karnataka from 64 percent a
year earlier, while “good” crop conditions increased to 30
percent in Uttar Pradesh from 20 percent in 2013-2014, SGS said.
Yields are expected to increase in Maharashtra and Uttar
Pradesh “due to continuous and good rainfall,” SGS said.

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To contact the reporter on this story:
Pratik Parija in New Delhi at +91-11-4179-2032 or
pparija(at)bloomberg.net
To contact the editors responsible for this story:
James Poole at +65-6212-1551 or
jpoole4(at)bloomberg.net
Thomas Kutty Abraham