Production:
Sugarcane and sugar production in India typically follow a 6 to 8 year cycle, wherein 3 to 4 years of higher production are followed by 2 to 3 years of lower production. After two consecutive years of declining sugar production (MY 2007/08 and 2008/09), production resurged in MY 2009/10, and is set to gain strongly in the upcoming MY 2010/11.
India‟s total centrifugal sugar production in MY 2010/11 is forecast at 24.7 million tons (including 435,000 tons of khandsari sugar [1] ), up 27 percent from the MY 2009/10, on expected improved sugarcane supplies due to higher cane planting and yields. Gur [2] production is forecast lower at 5.6 million tons compared to 6.6 million tons last year on expected weak prices.
Relatively strong cane prices vis-a-vis last year and also compared to competing food crops (rice, wheat, pulses) during the ongoing MY 2009/10 will support higher cane acreage; MY 20010/11 is forecast to increase by 13 percent to 4.8 million hectares. Assuming normal monsoon and subsequent weather condition, yields are expected to improve over last year‟s adverse weather impacted crop. Consequently, MY 2010/11 sugarcane production is forecast higher at 325 million tons compared to 282 million tons in MY 2009/10.
Post‟s MY 2009/10 centrifugal sugar production estimate is revised higher to 19.5 million tons due to lower diversion of cane for production of alternative sweeteners (khandsari and gur) and better than anticipated cane production. After drought like conditions in June through mid-August, most of the cane growing areas received adequate and well scattered rains from mid-August through October during the crop growth stage. Low winter temperature and scattered rains in December-January further contained expected crop damage due to early dry conditions. High sugar prices and „speculation' [3] on lower cane crop resulted in sugar mills offering substantial increase in cane prices to farmers compared to last year (see Table 6). The higher cane prices by the sugar mills coupled with relatively weak gur prices vis-a-vis sugar (see tables 5 & 6) limited the diversion of sugarcane for production of gur during the peak crushing season.
The mill sugar production for MY 2009/10 up to March 15, 2010 is estimated at 15.3 million tons (crystal weight basis) compared to 13.3 million tons for the corresponding period of MY 2008/09. The recent weakening of gur prices has lowered the prospects for late season diversion of cane for gur production. Crushing is going on in the major producing states of Maharashtra and U.P., and may continue through April/early May, nearly 4 weeks longer than last year. Industry sources report the average crushing duration during the MY 2009/10 at 150 days (vs. 120 days last year) and average sugar recovery higher at 10.3 percent (vs. 10.0 percent last year). Consequently, MY 2009/10 centrifugal sugar production has been raised to 19.5 million tons against the earlier estimate of 17.3 million tons.
Post‟s estimates for MY 2008/09 sugarcane production have been revised higher and sugar production revised marginally lower based on final estimates from the Ministry of Agriculture and the Indian Sugar Mills Association, respectively.
[1] Khandsari sugar: a low recovery centrifugal sugar prepared by open-pan evaporation method.
[2] Gur: a crude non-centrifugal sugar in lump form produced by open pan evaporation method.
[3] GOI‟s initially estimated MY 2009/10 sugarcane crop at 249 million tons in December, 2009.
Consumption:
Sugar consumption in MY 2010/11 is forecast to increase to 24.5 million tons on forecast improved domestic supplies and strong demand – fueled by a growing population and continued growth in economy [1]. Bulk consumers such as bakeries, makers of candy and local sweets, and soft-drink manufacturers account for about 60 percent of mill sugar demand. Most of the khandsari sugar is consumed by local sweets manufacturers. Gur is mostly consumed in rural areas for household consumption and feed use.
Prices
Despite various measures taken by the Government of India (GOI) to control sugar prices [2], sugar prices escalated during calendar year 2009 on fears of short domestic supplies [3] and strong international sugar prices. Sugar prices have eased significantly from February 2010 (see table 5) on improved expectations of domestic production in MY 2009/10 and forecast higher production in MY 2010/11.
March end sugar prices in major domestic wholesale markets ranged from $685 to 745 per ton, about 17 percent lower than peak prices in January, 2010. However, sugar prices are still more than 50 percent higher than prices in March 2009. Prices are expected to continue to weaken further in the coming months on improved domestic supplies, although international price movements can impact domestic prices. Gur prices had been under pressure from the beginning of the MY 2009/10 due to record opening stocks (see Table 6). However, gur prices are expected to remain stable relative to sugar prices in the coming months due to drawdown in the stocks and lower production in MY 2009/10 and MY 2010/11.
Stocks
The MY 2010/11 ending stocks are forecast higher at 5.36 million tons compared to 3.98 million tons for MY 2009/10 ending stocks, both well below the normal acceptable stock levels of the three-month consumption requirement.
[1] Despite the global recession, the Indian economy showed a recovery in Indian fiscal year 2009/10 (April/March) with growth rate expected at 7.2 percent compared to 6.7 percent in IFY 2008/09. Analysts expect Indian economy to grow further in IFY 20010/11 anywhere between7.5 to 9 percent per annum. Indian population has been growing at 1.8 percent per annum as per the last census.
[2] For more information see IN9133 and IN9129.
[3] Industry estimates about India‟s mill sugar production estimates were as lows at 12.0 to 14.0 million tons at the beginning of the season.
Trade:
India‟s MY 2010/11 imports are forecast lower at 1.2 million tons due to forecast improved domestic supplies. Industry sources expect imports mostly during the early part of the season. The GOI may withdraw the relaxed import policy [1] on improving domestic supplies and lowering of sugar prices to more comfortable levels as the domestic crushing season progresses. Despite forecast higher sugar production, relatively tight domestic supplies preclude any significant commercial exports of sugar in MY 2010/11; exports will be largely limited to quota countries.
Post‟s MY 2009/10 import estimate is revised lower to 4.5 million tons based on the current pace of imports reported by industry sources. Trade sources estimate India‟s sugar imports during the October 2009 to February 2010 at 2.9 million tons; of which about 2.3 million tons is raw sugar mostly from Brazil, and rest white sugar from Thailand, Brazil, U.A.E. An additional 500,000 tons, mostly white sugar, have been contracted for delivery through June/July, 2010. Despite weakening domestic sugar prices, industry sources expect additional imports of raw sugar in August/September before the beginning of the next crushing season. Consequently, MY 2009/10 imports are forecast to reach a record level of 4.5 million tons [2] . For the latest updates PRESS CTR + D or visit Stock Market news Today
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