India’s Centrifugal Sugar Estimates Are 25% Higher Than Last Year, Says USDA

India’s centrifugal sugar (henceforth sugar) production forecast for The year 2017-18 (out-year) has been revised up to 27.7 MMT, 7.4 per cent above the previous post estimate and 25 per cent above last year’s.  The average sugar recovery rate is expected to remain modest at 11.2 per cent; that is 0.2 percent above the last year and is also the highest recovery rate achieved so far.  The highest estimated sugar production from Uttar Pradesh (UP) in decades coupled with a slightly higher output from Maharashtra and Karnataka will boost sugar production in the out-year.  

An early demand pull by users and a large crop will encourage sugar mills to advance crushing of canes in a timely manner across major cane growing states while apparently losing the advantage of accumulating additional sucrose during the extended harvest period.  Cane supplies to jaggery (jaggery or crude, non-centrifugal lump sugar) manufacturing units will return to more normal levels, with the out-year jaggery production reaching upwards of 6.6 MMT.  The above prognosis assumes normal weather and market conditions going ahead. 

Additionally, reduced cane arrears (particularly in UP which claim to have disbursed more than 92 percent of pending cane arrears), resultant improved cash flows, strong stock holding limits for sugar producers should help improve sugar sales to bulk users and retailers particularly when consumption demand is expected to remain strong and sugar prices are likely to remain stable.  According to the latest production data, sugar production for 2016-17 is now estimated at 22.2 MMT, 320,000 metric tons above the previous estimate.  An additional half a million ton of commercial imports in the year 2016-17 has slightly improved sugar supply to 34 MMT and was just enough to meet consumption and stock requirement.

The latest crop weather watch report indicates the total sugarcane (cane) planting for the year 2017-18 at five million hectares, which is 14 per cent above last year.  Assuming slightly above normal yield at 71.4 tons/hectare (ha), total cane production in out-year is estimated at 357 MMT, 16 per cent above last year and is 27 MMT above earlier forecast done in early April this year.  Rising share of high-yielding, short-duration cane varieties; particularly in UP, and the return of cane area lost to the previous drought in Western and Southern states will support higher cane yield.   

The fourth advance estimate from Ministry of Agriculture estimates cane production at 306.7 MMT for the year 2016-17 from 4.38 million hectares.  Planted area is three percent below the previous estimate of 4.5 million hectares, but a higher yield estimate of 70 tons/ha (nine per cent higher than previously estimated) helped raise estimated cane production.

Consumption:

The sugar consumption for the year 2017-18 is now revised up by 0.5 MMT to 26.5 MMT based on lower estimated exports while the YEAR 2016-17 estimate remains unchanged at 25.7 MMT.  The government of India’s (GOI’s) recent notification to impose stock holding limits for the current month (21 per cent of the total sugar available with the mills during the year 2016-17) and similarly eight percent for October will further ensure adequate supply while keeping prices stable.  Sugar producers are not permitted to hold any stock of sugar in excess of advised quantities at the end of month. 

Market Prices 

Domestic sugar prices in 2017 have rallied by more than 50 percent through August 2017.  Industry sources expect sugar prices to remain favourable as prospects of improved supply will be partially offset by early demand from significant Indian festivals.  Jaggery prices have increased more than 18 percent in last seven months due to early closure of sugar mills, an extended lean period and tepid demand.  Currently, Indian wholesale sugar price is trading at USD 625 per MT, while jaggery is selling at a nominal discount of USD 25 per MT to sugar.  Additionally, international sugar prices fell more than 33 per cent in last nine months while domestic sugar price remained strong; thereby indicating that imports can still be competitive even at the current 50 per cent import duty.   

Sugar and Jaggery Prices in Delhi Market