The Hindu Business Line : Indian sugar output may weigh on global market

According to the Australian Bureau of Agricutural and Resource Economics (Abare), the rise in price is despite an increase in production by a little over two per cent.

The production increase is seen offset by a corresponding rise in consumption.

"The most significant change influencing global supply-demand in 2003-04 has been a considerable downgrade in estimated production in India. Dry conditions, irrigation water shortages and pests in Gujarat, Maharashtra and Gujarat have been responsible for poorer cane growing conditions and lower production," Abare said in its report for the June quarter.

Abare has projected the sugar production in the country to decline by 60 lakh tonnes.

This means the output could be around 140 lakh tonnes as feared by a section of the industry.

For the next season, Abare sees only a partial recovery in production.

"In 2004-05, with a return to average climatic conditions, but with the impact of insects/pests persisting and cane areas falling because of cane farmer payment problems, Indian production is forecast to rise only moderately," it said.

Abare views this as a factor for higher domestic price but it is "likely to have a slowing impact on sugar consumption growth".

Dry conditions in Thailand, especially in the north-eastern region, besides change in Bangkok's guaranteed cane price policy would have an adverse effect on the production, the Australian research body said.

However, the conditions in India and Thailand are likely to be offset by a new record cane crop in Brazil.

In short, Abare sees global production at 147.2 million tonnes (mt) during 2004-05, consumption at 147.5 mt and 0.3 mt dip in closing stocks.

Other factors seen impacting the market are import demand from Russia and China, where saccharine is being replaced as artificial sweetener.

As a result, global prices for raw sugar could average at 8 cents per pound against 7.6 cents this season.