India will likely produce 25 million tonne of sugar in 2012-13 factoring in dry spells in biggest producer Maharashtra as well as Karnataka, Isma president Gautam Goel said, calling it a conservative estimate. The usual annual consumption is 21.5 million to 22 million tonne. Although production will likely be lower than this year’s 26 million tonne, adequate domestic stocks will keep domestic supplies steady in 2012-13.
“There are lots of data floating around about sugar production next year. These are leading to speculations, which have sparked the rally in prices. So we wanted to put things straight with this estimate.... There is no reason to panic,” Goel said. So the government should not reverse its current curb-free sugar export policy, as the country “will not be required to import but it can export next year”, he said. He projected 2-3 million tonne of exportable surplus of sugar for the next marketing year.
The statement came at a time when the food ministry is considering capping sugar exports under the open general licence at 1.5 million tonne to improve domestic supplies as retail prices of the sweetener surged 15% in one month on fears poor monsoon may hurt the cane crop. Agriculture minister Sharad Pawar also said on Tuesday exports are not viable at the moment as Indian prices are higher and a curb on exports is not necessary.
Prices of key farm commodities, especially sugar, started rising sharply since mid-June on fears that poor monsoon will hit summer-sown crops. Sugar prices hit an 18-month high in August on apprehension that dry spells in key producing regions of Maharashtra may hurt cane yield. Sugar prices are ruling around R40 a kg in Delhi and Mumbai, up 25% from a year earlier.
Isma director general Abinash Verma said cane coverage in Maharashtra for the next season is reported to be 9,45,000 hectares, slightly less than the 1.02 million hectares in the current season. “Lower rainfall in the state is expected to impact the yields. Considering this, the sugar production estimate from Maharashtra has been lowered by 15% from 8.95 million tonnes in the current season to 7.6 million tonnes in next season,” he said. Similarly, Isma has reduced sugar output in drought-hit Karnataka by 21% to three million tonne in 2012-13.
However, lower output from the two states will be partly offset by higher production in Uttar Pradesh and Tamil Nadu due to more area under the crop following high returns to farmers this season.
Sugar output in Uttar Pradesh is estimated at 7.8 million tonnes in 2012-13, up 11.4% from a year before. Similarly, production in Tamil Nadu is expected to rise to 2.5 million tonne from 2.25 million tonne in 2011-12.
Separately, the food ministry on Wednesday ordered an additional sales of 4,00,000 tonne of sugar in the open market by mills and co-operatives in August, dragging down futures price to a one-week low. With this, mills have been asked to offload 5.16 million tonnes of sugar this quarter. The key September contract on the National Commodity & Derivatives Exchange lost 1.24% in at R3,428 per 100 kg in the intraday trade, after hitting a low of R3,420 earlier in the day.
The additional releases would reflect accordingly in the the stocks level at the end of 2011-12, which was estimated at 7 million tonnes. The country had 5.5 million tonne in stocks at the end of 2010-11, according to an Isma estimate.
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