The Hindu Business Line : Sugar output seen below 265 lakh tonnes

New Delhi, June 18 The country’s sugar production is likely to end up a shade below 265 lakh tonnes (lt) in current 2007-08 crushing season (October-September).

Mills closed

According to official estimates, total output in the season up to May 31 amounted to 254.02 lt, down from the 271.09 lt for the corresponding period of 2006-07. Mills have closed down for the season in virtually all States, barring Tamil Nadu (TN), Maharashtra and Karnataka.

Industry sources say that Maharashtra’s final production will be about 91 lt (against 88.5 lt till May 31), while these would be 30 lt for Karnataka and 21 lt for TN. “At the most, there will be an extra 10 lt produced during the four remaining months of the season, which would take overall output in 2007-08 to just below 265 lt,” they pointed out.

Current stocks

The current season began with stocks of 110 lt, based on the Excise Department’s assessment of sugar lying with mills (though the trade puts this number lower by at least 10 lt). Taking production at 265 lt, officially estimated domestic consumption of 210 lt (which is again 10 lt below what the trade believes it would be) and exports of 40 lt, the season will end with stocks of 125 lt. The trade’s figure would be 105 lt or less.

The real problem, however, is in estimating the likely output in the ensuing 2008-09 season from October 1. There is unanimity over production being lower, but not on how much lower. Mr Sanjay Tapriya, Director (Finance) at Simbhaoli Sugars Ltd, feels that production in Uttar Pradesh alone will be 10 lt or more lower than the current season’s 73 lt.

Maharashtra’s production

The Managing Director of the Maharashtra State Cooperative Sugar Factories’ Federation, Mr Prakash Naiknavare, projects sugar output in his State for 2008-09 at 70 lt – a drop of over 20 lt. “We would be able to crush only 610 lt of cane, which at 11.5 per cent recovery, gives slightly above 70 lt”, he noted.

With the two leading States producing 30 lt less and others put together registering another 10 lt drop, there is likelihood of sugar output in the coming season falling to 220-230 lt, which is around the level of anticipated domestic consumption. “Even after accounting for the opening stocks, there would not be much surplus left for exports. The country could even turn importer in 2009-10”, the sources said.

But all these projections are always liable to change. For example, Maharashtra was initially expected to produce only around 85 lt in the current season because of less cane crushed by mills. “We have crushed only 762 lt, compared to last season’s 798.23 lt. However, the average sugar recovery, at 11.93 per cent, has turned out to be way above the 11.39 per cent. So, we will e nd up producing more or less the same quantity of sugar as in 2006-07”, Mr Naiknavare said.

Global scenario

The other uncertainty is on the international front. In the last one week, the August London white sugar contract has gone up by over $ 25 to $ 379 a tonne, while raw sugar futures at New York (No. 11 for October) has climbed more than a cent to 12.70 cents a pound.

These, in turn, have been fuelled by record corn (maize) prices arising from flood damage to the US crop. As a result, the demand for fuel ethanol is expected to be met increasingly from Brazilian cane, leaving that much less crop available for making sugar.

Already, with ethanol prices going through the roof, alcohol-based chemical manufacturers such as Jubilant Organosys, India Glycols and Lakshmi Organic Industries have apparently decided to go slow on import plans.

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