India may need to import sugar as planting wanes

By Rajendra Jadhav

SOLAPUR, India (Reuters) – India’s sugar output this crop 12 months, hit by weak rains, is ready to lag consumption for the primary time in seven years, in keeping with merchants and a survey of farmers, and decrease plantings could even power the world’s No.2 producer to import within the following 12 months.

Pushed by falling yields in two key producing states, Maharashtra and Karnataka, the sluggish outlook for the crop 12 months that started in October reinforces expectations India will ban sugar exports in 2024.

Sugar output could possibly be even decrease within the subsequent crop 12 months, which runs to September 2025.

Low reservoir ranges in Maharashtra and Karnataka, which collectively produce almost half of India’s sugar, are prompting many farmers to plant crops that want much less water and mature quicker than cane, resembling sorghum and chickpeas, Reuters present in a survey of over 200 farmers.

Reuters’ calculations primarily based on the survey confirmed output may fall this crop 12 months and subsequent, in step with merchants’ inner forecasts. Consumption is predicted to rise over the identical interval.

Whereas the survey covers a small pattern of farmers in key areas, it exhibits rising pressures that might power India, which provides 12% of worldwide traded sugar, to grow to be a web importer from as early as the primary half of 2025, business insiders instructed Reuters, in what could be a significant reversal.

The prospect of this 12 months’s crop falling wanting forecasts and India being pressured to import sugar for the primary time since 2017 threatens to drive up international costs, which already hit multi-year highs final month. Prime exporter Brazil is more likely to be the winner.

India’s Division of Meals and Public Distribution didn’t reply to a request for touch upon the forecasts.

India produced 33.1 million metric tons of sugar within the crop 12 months that led to September, and the Indian Sugar Mills Affiliation stated in August web manufacturing may fall to 31.7 million tons within the crop 12 months that started in October.

Forecasts shared with Reuters from 5 buying and selling homes are decrease, ranging between 29 million and 30 million tons, taking into consideration India’s current route to restrict diversion of sugar for ethanol manufacturing because it tries to spice up sugar provides.

“Previously few weeks, we have noticed a big decline in cane yields in Maharashtra and Karnataka,” stated a seller at a worldwide buying and selling home, which because of this minimize its forecast for the present crop 12 months to 29 million tons.

Merchants stated the next 12 months’s output might be even weaker, though exact estimates rely on planting and the summer season’s rains. Three homes predict a crop within the 25 million to 26.9 million ton vary.

On the identical time, home sugar consumption this crop 12 months is predicted to rise 5% from a 12 months earlier to round 29.2 million tons resulting from inhabitants progress and rising incomes, stated Rahil Shaikh, managing director of MEIR Commodities India.

“The cultivated space in Maharashtra and Karnataka is shrinking, doubtlessly resulting in India searching for purchases within the international market. Nonetheless, quite a bit hinges on planting, as it should decide the quantity India may have to import,” the seller stated.

The companies declined to be named, in step with home coverage.

‘NO WATER TO PLANT’

Cane rising districts in Maharashtra and Karnataka acquired as little as 56% of regular rainfall as this 12 months’s monsoon was the weakest since 2018. El Nino climate made for India’s driest August in over a century.

“The mills are providing report costs for sugar cane, however I am caught as a result of there isn’t any water to plant cane on my 4 acres,” stated Ashok Shinde, a farmer from Maharashtra’s Solapur district, as he confirmed the sorghum he planted as an alternative of cane.

Solapur farmers rely on the Ujjani dam, which is at simply 22% of capability, in comparison with its 10-year common of 80%.

“The federal government stated it should reserve the water for consuming and will not let it out for irrigation,” Shinde stated.

Different key reservoirs in Maharashtra and Karnataka maintain as little as 28% of the 10-year common.

Like Shinde, 181 different farmers throughout 11 cane-producing districts of Maharashtra and one other 49 farmers from Karnataka’s sugar belt all stated they’re curbing cane-growing or abandoning the crop due to water shortage.

Primarily based on their studies of decrease yields and smaller planting areas, Reuters calculations discovered India’s web sugar manufacturing may fall to 29 million tons this 12 months, dropping to 26.6 million tons subsequent 12 months, with much less land below cane cultivation.

The figures incorporate expectations that manufacturing would rise in Uttar Pradesh, which has higher irrigation.

REVERSAL

India has exported a mean of 6.8 million tons of sugar over the previous 5 years, making it the No.2 shipper in that interval. It was surpassed final 12 months by Thailand to grow to be No.3.

Switching to imports could be painful, with native costs at a pointy low cost to world benchmarks. In India, wholesale white sugar trades at round 39,000 rupees ($467.74) per ton, in comparison with London futures above $610 per ton.

Reuters reported in August that India, which is very delicate to meals inflation, particularly with Prime Minister Narendra Modi going through election subsequent 12 months, was more likely to ban sugar exports, the primary restriction on shipments since 2016.

New Delhi has stated it should resolve on exports as soon as agency manufacturing estimates grow to be out there, however merchants stated the probably drop in sugar manufacturing beneath consumption makes it all-but-certain that India is not going to permit shipments.

“Normally, the business pursues the federal government to allow exports. Nonetheless, this 12 months, even business our bodies will not be advocating for exports,” stated a Mumbai-based seller with a worldwide buying and selling home.

As for the prospect of imports, Shaikh of MEIR Commodities stated India’s choice could be to chop ethanol manufacturing and increase output.

However a Mumbai-based business official stated that merely lowering ethanol manufacturing would not suffice and imports could be mandatory to beat shortages.

Farmer Vijayakumar Magdum in Maharashtra’s Sangli district, the place rainfall was 44% beneath regular throughout this 12 months’s monsoon, highlighted the ache the sector faces, saying wells dried up in August and wilted his cane crop.

“As a result of decrease yields, we could not get better manufacturing prices this 12 months,” Magdum stated.

“We lack the required water to plant even short-duration sorghum, and planting long-duration cane is out of the query.”

($1 = 83.3800 Indian rupees)

(Reporting by Rajendra Jadhav; Modifying by Tony Munroe and Sonali Paul)

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