Sugar

Mauritius cut its 2017 sugar production forecast by 2.7 percent, blaming above average rainfall for a poor harvest. It now expects sugar production of 350,000 tonnes this year, down from a previous forecast of 360,000 tonnes. Rainfall in the month of May was well above average representing 272 percent of the long-term average while the island received only 90 percent of the normal sunshine. Mauritius produced 386,277 tonnes of sugar in 2016. Sugar contributes about 1 percent of the Indian Ocean island’s $13 billion gross domestic product.

Prices of sugar continued to fall in the key wholesale markets of north India due to sluggish demand from bulk buyers. Most importantly, there is no demand. Also, production of sugar in Uttar Pradesh is expected to be higher next year. Sugar output in Uttar Pradesh is likely to rise to a record 10.3 million tonne in the next season starting October from 8.8 million tonne year ago. In the key wholesale markets of Maharashtra, sugar prices were largely unchanged amid lacklustre trade.

The government decision to allow import of 300,000 tonne of sugar at a concessional duty of 25% is unlikely to have any significant negative impact on prices of the sweetener in the near term, as the quantum of import permitted is very small. Including the 300,000 tonne of imported sugar, the closing stocks for current season are estimated to be around 4.7 million tonne, which would just be sufficient to meet the requirement of around two months of domestic consumption. The expected carryover stock for 2017-18 was lower than the normative stock level of three months–around 6 million tonne–and last year’s closing stock of 7.8 million tonne. The move to allow imports might also benefit the sugar mills based in west and south India, which are currently under profitability pressure due to low availability of cane.

Output of most kharif crops, barring cotton and sugarcane, is seen declining due to dry spell during Jul-Aug. In the Jun-Sep monsoon season so far, Karnataka has received 644.1 mm of rainfall, 10% below normal. Sugarcane production is seen up at 30.4 million tonne, compared with 23.5 million tonne last year.

Global prices have fallen over a quarter so far in 2017 to around $378 a tonne as output is expected to climb in key producers like India, China and Thailand. Sugar cane is a popular crop in the country as the government sets procurement prices, while the industry is protected by a 40 per cent import tariff which has led to high domestic prices. The country last had an export subsidy in 2015/16, set at 13,000 rupees ($124) per tonne for exports of 650,000 tonnes of the sweetener, and a similar subsidy level is needed again. The country produced 7 million tonnes of sugar in the 2016/17 marketing year ending September 30, exceeding local demand of around 5 million tonnes, and the association pegs this year’s crop at a record 8 million tonnes. Industry urges govt to allow export of 2m tons of sugar.

With the crop developing well, as a result of favourable recent rainfall and temperatures, the latest sugar production estimate for the coming season was in excess of 1.4m tonnes, and this would help to mitigate the impact on profit of lower prices. A reduction in stocks, together with the abolition of sugar quota and export restrictions from October this year, meant that the contracted area for 2017-18 had been increased by a third.

With domestic sugar prices in the wholesale market quoted at around Rs 39 a kg, imported sugar continues to remain cost-effective in southern states even with a 25 per cent duty. In Tamil Nadu, sugar is priced Rs 1.50-2 a kg more than that in Maharashtra due to supply shortage. The southern state faces huge supply deficit this year due to three-four years of subsequent drought resulting into lower local production. Worryingly, the drought continued this year too, which prompted policy makers to allow raw sugar import of 300,000 tonnes at 25 per cent of import duty against the prevailing duty of 50 per cent.

Up in arms against the failure of the state government to make payment of arrears to sugarcane growers and to accept the other demands of farmers, the Bharti Kisan Union — Lakhowal (BKU) has decided to hold indefinite gherao at the residence of Chief Minister Captain Amarinder Singh.

Prices of sugar were down in key wholesale markets across the country after the Centre allowed imports of the commodity. The Centre has allowed import of 300,000 tonnes raw sugar at a basic Customs duty of 25 per cent under the tariff rate quota for 60 days. The import of 300,000 tonnes sugar has been allowed through the ports of Tuticorin and Chennai in Tamil Nadu, Karaikal in Puducherry, Mangalore in Karnataka, and Kakinada, Visakhapatnam and Gangavaram in Andhra Pradesh. This season, average sugar prices in southern India have been ₹150-200 per 100 kg higher than those in the north due to this fall in output. Since the import has been allowed under the tariff rate quota, millers and refiners have to convert the imported raw sugar into refined or white sugar within 30 days from the date of bill of entry.

Prices of sugar continued to fall in key wholesale markets of India after the government allowed imports of sugar. The government allowed import of 300,000 tonne raw sugar at a basic customs duty of 25% under the tariff-rate quota for 60 days. Sugar imports currently attract a duty of 50%.

Some sugar mills in western Uttar Pradesh are likely to begin cane crushing operations for 2017-18 (Oct-Sep) on Oct 10. Mills will halt cane processing for a week on account of Diwali, scheduled Oct 19, and resume crushing operations by Oct 25. Most mills in the state are expected to begin crushing sugarcane by late October.

Sugar output in Thailand for 2017-18 (Nov-Oct) is expected to rise to 11.5-11.8 million tonne from 10 million tonne a year ago. The rise in sugar production can be attributed to increase in area under cane in the country and favorable weather conditions. Acreage has increased this season as cane prices for 2016-17 were good. The area under sugarcane in the country in 2017-18 is estimated at about 1.77-1.79 million hectares and the cane output is seen at 107-110 million tonne, higher from 92.90 million tonne produced a year ago.

Unusually dry weather in Brazil’s center-south sugar-producing region is likely to cut the total cane output per hectare for the rest of 2017 and in 2018.

Raw sugar futures on ICE settled higher, boosted by a weak dollar and dryer-than-normal weather in Brazil. October raw sugar settled up 0.4 percent, at 14.09 cents per lb, 2.5 percent higher on the week. The market was supported by the weak dollar while speculators also continued to reduce a large net short position.

Brazilian court has suspended the judicial auction of a sugar mill owned by India’s Shree Renuka Sugars Ltd scheduled for September 4, after a request from state bank BNDES.

India Sugar Mills Association is likely to maintain its sugar output estimate for 2017-18 (Oct-Sep) at 25.1 million tonne. There is slight reduction in Karnataka’s output and a rise is seen in sugar production in Uttar Pradesh. Uttar Pradesh is the top producer of sugarcane in the country and along with Maharashtra accounts for half of India’s total sugar output.

Uttar Pradesh official:’17-18 cane area seen 2.3 million ha vs 2.1 million. Sugar output in Uttar Pradesh is likely to rise to a record 10.3 million tonne in the next season starting October from 8.77 million tonne year ago. Uttar Pradesh is the top producer of sugarcane in the country and along with Maharashtra accounts for half of India’s total sugar output. Last year, cane area in Uttar Pradesh was 20.5 lakh (2.05 million ha). This year there is an increase of 10-12%, and area is seen around 23 lakh (2.3 million ha). Sowing of sugarcane is almost at its ending stage and farmers so far have already planted nearly 2.3 million ha of sugarcane in Uttar Pradesh, up 5.1% on year.