FNB News - Sugar production for current SS lower substantially due to AP drought

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Sugar production for current SS lower substantially due to AP drought

Wednesday, 08 March, 2017, 08 : 00 AM [IST]

Our Bureau, New Delhi

The Indian Sugar Mills Association (ISMA) had previously estimated the sugar production for the current season at 213 lakh tons at its January 2017 meeting, attended by members from across the country. However, the yield of the sugarcane harvested in January and February 2017, in Maharashtra, Karnataka, Andhra Pradesh and Telangana, which were badly affected by the drought that those states has been facing for the last couple of years, turned out to be substantially lower to what was being expected.

In some areas, the yield per hectare in February 2017 was 40 to 50 per cent lower than last year’s yield at the same time. In addition to this, the higher need of seeds for increased acreage, especially in the state of Maharashtra, also resulted in lower sugarcane availability for crushing this season.

Accordingly, the members of ISMA, in its meeting held recently, representing sugar-producing states from across the country, felt that there was a need to revise the sugar production estimates in the current season. After detailed discussions and after considering the views of members representing respective states, ISMA was of the opinion that the sugar production in sugar season (SS) 2016-17 would be around 203 lakh tons.

The mills in Maharashtra have almost closed their crushing operations, except 17 mills, and, therefore, the state is expected to produce around 42 lakh tons. Similarly, the mills in Karnataka have also closed their crushing operations, but considering that it will have a special season between July and September 2017 in South Karnataka, it is expected that the state will produce 21.25 lakh tons.

However, sugarcane availability, sugarcane yields, as well as sugar recovery in the state of Uttar Pradesh is substantially better than last year. The trend in the state is, therefore, very different to the drought-affected states in the western and southern parts of the country. Currently, there are 107 sugar mills which continue to crush sugarcane in Uttar Pradesh, which is higher than the mills which were crushing last year at the same time. Sugar production this year is nine lakh tons more than what it was at the same time last year. Most of the mills are expected to run till the latter part of April 2017. Members from the state felt that they will together produce around 85 lakh tons of sugar this season.

On the other hand, the sugar sales and off-take from sugar mills is substantially lower compared to last year. Instead of seeing an increase in the sales, the mills are witnessing a drop in the same in comparison to last year. ISMA has already received reports from all sugar mills, and noted that in the first four months of the current season (i.e. upto the end of January 2017), sales by sugar mills have been lower by 7.5 lakh tons. In the meeting of ISMA yesterday, members from all the states reported that the sugar off-take was dull and, therefore, the off-take in February as well as in March, is also on the lower side. The main reason for lower sales could be demonetisation, drop in sugar purchase by the bulk consumers, price elasticity affecting demand and anticipated lower demand by state governments because of proposal to remove subsidy from the Central government on public distribution system (PDS) sugar. Therefore, as compared to last year’s sugar off-take of 248 lakh tons, ISMA now expects that the sugar sales this season will be between 238 and 240 lakh tons.

Considering the opening balance of 77.5 lakh tons (which has been reported by all sugar mills to the government) and considering an estimated sugar production of 203 lakh tons in the current season and a consumption of 238-240 lakh tons, the closing balance in the current season would be between 40 and 42 lakh tons. This balance will be enough to meet the domestic requirement till almost the end of November 2017.

With higher sugarcane availability expected in the next season in Maharashtra, the sugar mills in western as well as in southern India should be starting their crushing in first half of October 2017, which is the usual practice therein. Also, with Diwali now being earlier (on October 19, 2017), the mills in northern India will also start by the latter half of October 2017. Hence, sugar from the new season would be available in the market by the end of October 2017.

Therefore, if the opening stocks of sugar on October 1, 2017 are enough to meet the interim period, by which new sugar is available in the market, there is absolutely no need to supplement the domestic availability with any sugar imports. The current sugar prices have been stable for the last few weeks. In fact, a revision has also happened to the extent of Rs 50 per quintal, and, therefore, the prices also should not be any reason to supplement domestic availability. Nevertheless, once the crushing period gets over in the latter half of April 2017, ISMA will again review the above along with its members from across the country.