White sugar is displayed in a sack as it is sold in a grocery store in Mumbai, India. (Photographer: Shirish Shete/Bloomberg News)

Pests and Drought Set to Cut Indian Sugar Output From Record

(Bloomberg) -- Persistent dry weather and pest attacks are poised to cut India’s sugar output from a record this year even after farmers in the world’s second-largest producer increased plantings.

Production may total 28.9 million metric tons in the year that began Oct. 1, according to SGS SA, a researcher hired by Bloomberg to survey farmers during September and October in the main growing regions. That compares with the reduced estimate of 32 million tons made last month by the Indian Sugar Mills Association. The National Federation of Cooperative Sugar Factories Ltd. forecast production at 32.4 million tons.

Pests and Drought Set to Cut Indian Sugar Output From Record

“Sugar cane, with its lush vegetative growth, is very susceptible to drought and the Indian crop suffered from this in 2018 along with attacks of white grub in the key producing state of Maharashtra,” Mark Oulton, global agricultural market research manager with SGS, said in an email. “This will more than offset the overall 7 percent increase in acreage.”

A smaller harvest than expected by the industry bodies may reduce exports from India, giving some support to prices that have fallen about 6 percent from their recent peak last month. Crop downgrades in India will force the global sugar market into a deficit for the 2018-19 season, according to Marex Spectron. Still, record production last year means the government is planning measures to help mills export as much as 5 million tons in 2018-19.

Pests and Drought Set to Cut Indian Sugar Output From Record

Sugar cane planting increased in five surveyed states, with only Tamil Nadu reporting a decline, SGS said. National yields likely dropped about 10 percent due to erratic rain across the country as well as white grub infestation in some areas of Maharashtra and Karnataka.

Cane Production

SGS surveyed 863 farmers between Sept. 27 and Oct. 20 across six states, including top producers Uttar Pradesh and Maharashtra. The results have a 95 percent “confidence level” with a margin of error of about 4.3 percent.

Cane production is seen declining 3.8 percent to 362.5 million tons. About 70 percent of the crop will be crushed, according to the survey, while the rest will be used for livestock feed, seeding and jaggery, a local sweetener. SGS used a sugar-extraction rate of 11 percent for each ton milled, it said citing data from Indian Sugar Mills Association.

Pests and Drought Set to Cut Indian Sugar Output From Record

Highlights from the survey:

  • About 35 percent of the overall crop is in good condition, down from 52 percent a year earlier.
    • About 21 percent are in bad condition, up from 3 percent in 2017 survey.
    • Remaining crops are normal.
  • Sugar cane yields will likely drop 14 percent in Uttar Pradesh and 9.3 percent in Maharashtra.
    • Declines will be bigger in smaller producers, with Andhra Pradesh seen falling 15.6 percent and Tamil Nadu down 18.2 percent.
  • Harvest will drop 8.3 percent in top producer Uttar Pradesh and 25.7 percent in Tamil Nadu, SGS said.
    • It will climb 11.9 percent in Gujarat, 8.8 percent in Karnataka and 0.3 percent in Maharashtra.

This year’s monsoon in India was below average, with total rainfall between June and September 91 percent of the 50-year average of 89 centimeters (35 inches), according to the Indian Meteorological Department.

Farmers surveyed expect cane prices to increase 8.5 percent to 19 percent, according to SGS. Mills buy cane at rates set by the federal as well as state governments.

Pests and Drought Set to Cut Indian Sugar Output From Record

Last year, SGS predicted India’s production at 25.886 million tons for 2017-18, less than the final tally of 32.5 million tons estimated by the Indian Sugar Mills Association.

Estimates for lower output may support global sugar prices, which have slumped 15 percent this year to 12.84 cents a pound in New York.

©2018 Bloomberg L.P.