Sugar output estimate cut to 31.5 mt

However, given the surplus overhang, closing stock will still be very high, even though the export scene appears to be better

Contrary to earlier estimates of sugar production reaching 35 million tonnes in the 2018-19 sugar season (October 1 to September 30 of calendar 2019), the industry estimate is now only 31.5 mt, even lower than the 32.5 mt of 2017-18.

This is better news for mills, struggling to clear their huge sugar stocks. However, the hangover of a high closing stock remains.

Explaining its lower estimate for the current season, the Indian Sugar Mills Association (Isma) pointed on Monday to the “adverse impact of weather and rainfall in the three largest sugarcane producing states of Uttar Pradesh, Maharashtra and Karnataka, and white grub infestation in Maharashtra and North Karnataka. Sugar production in 2018-19 would be around 32 mt and, considering the diversion for ethanol, the estimate is 31.5 mt”.

Another positive development for Isma is an improvement in the export market -- global prices have risen 20 per cent over recent months. hence, the body says it hopes to export four to five mt. To clear the supply glut, the central government had, a a few months earlier, said a three mt buffer stock would also be created.

As the current season began (October 1) with a carryover stock of 10.7 mt, with domestic consumption of 25.5-26 mt, ISma thinks (after a possible export of four to five mt) the closing balance on end-September 2019 would be 11.2-12.7 mt. “This is again a very high opening balance, compared to the country’s requirement of two months consumption,” it said.

Ethanol demand would substantially help if met as much as officially planned. However, the expected diversion is not considered likely to exceed the equivalent of 0.45 to 0.5 mt of sugar, as stated earlier. Cane crushing is yet to begin in most areas and a clearer picture would emerge once this happens, with the trend of yields and sugar recovery.