Uttar Pradesh to limit drop in Indian sugar production

sugar production

Indian sugar production will decline – but not by as much as some other commentators believe, US officials said, noting a rise in cane plantings in the northern state of Uttar Pradesh.

Many observers have forecast a sharp decline in sugar output in India, the second-ranked producing country, in 2016-17 thanks to weather.

Commodities trader ED&F Man estimates Indian sugar production falling to 22.5m-23m tonnes, while Rabobank forecast output of 23.3m tonnes.

However, the US Department of Agriculture's New Delhi bureau estimated output at 23.95m tonnes - albeit a figure still well below the 27.70m tonnes produced in 2015-16, and indeed the lowest in seven years.

Maharashtra vs UP

Chronic droughts in the top-producing state of Maharashtra, in western India, and its bordering state Karnataka will "further push overall [sugar] production levels below last year," the bureau's report said.

Farmers in these two states "chose to ratoon their cane crop… implying no new area was brought under planting", the bureau said, flagging a 31% drop in planted area in Maharashtra and Karnataka combined.

However, the bureau was upbeat on prospects for output in second-ranked producing state Uttar Pradesh, where production is being buoyed by improved mill finances, and indeed which has seen cane plantings rise by 6% year on year - with seedings largely of early maturing and high yielding varieties.

The dynamics will limit to 28.0m tonnes the drop in Indian sugar cane

production in 2016-17, leaving it at 324.0m tonnes.

Import implications

The impact of India's decreased sugar output will be to raise sugar imports to 1.4m tonnes in 2016-17, from 1.35m tonnes last season, the bureau said.

However, that import estimate remains well below the 2.0m tonnes forecast by Rabobank last week.

The bureau also highlighted that, in order to avoid escalating sugar prices, the Indian government imposed limits on how much stock sugar mills can hold.

The limit for October was 27% lower than a year ago, while for September it was 37%.

Earlier, the government had imposed stock limits on dealers and traders to prevent hoarding and also increased the sugar export tax to 20% in order to ensure adequate supply of sugar domestically.