India. Sugar Semi-annual. Oct 2014 Nov. 11, 2014
Post forecast centrifugal sugar production for marketing year (MY) 2014/15 at 27.3 MMT (raw value), a decrease of 640,000 metric tons (MT). This revision reflects less-than-anticipated sugarcane acreage in Uttar Pradesh and adjoining states. Tighter sugar supplies will boost opportunities for imports in MY 2014/15, which are now forecast at 1.0 MMT (mostly raw). Sugar exports for MY 2013/14 are revised from 1.8 MMT to 2.7 MMT as per the most recent trade estimates.
Note: Sugar data in this report are raw value basis unless otherwise noted. Post forecast India’s centrifugal sugar production for MY 2014/15 at 27.3 MMT, a decrease of 640,000 MT. This revision reflects less-than-anticipated sugarcane acreage, particularly in the sub-tropical areas, to include Uttar Pradesh and adjoining states. According to the Ministry of Agriculture’s latest planting progress report, total sugarcane area decreased from 5.03 million hectares in MY 2013/14 to 4.9 million hectares in MY 2014/15. Consequently, sugarcane production in MY 2014/15 is reduced by 5.0 MMT to 346 MMT. The production forecast for gur (a crude form of non-centrifugal lump sugar) is also revised down due to the latest estimates.
As noted above, cane acreage in MY 2013/14 was 5.03 million hectares, a decrease of 90,000 hectares from the previous estimate. Despite the forecast decrease in acreage, cane production in MY 2013/14 is revised up marginally to 350 MMT due to evenly distributed and timely monsoon rains in the western and southern states. Favorable precipitation in these regions helped raise average yields to 69.6 MT/hectare (an increase of two percent over the previous estimate) and contributed to a marginal overall production increase. Post notes that its forecast and the Government of India’s (GOI) estimates are generally complimentary regarding this production increase. However, centrifugal sugar production in MY 2013/14 is revised lower to 26.6 MMT. Marketing trends in MY 2013/14 saw farmers sell unusually high levels of sugarcane to directly to local gur producers versus sugar mills (particularly in Uttar Pradesh). One Post source estimated that an additional 11 MMT of cane was diverted to gur production.
Sugar consumption estimates for MY 2013/14 and MY 2014/15 remain unchanged.
Throughout the first half of MY 2013/14, sugar prices were down nine percent from the previous year’s corresponding period, primarily due to higher than anticipated stocks. However, more recently prices have rebounded on the back of stronger exports. In August 2014, sugar prices in the major Indian wholesale market ranged from $530 to $610 per MT. Post expects that sugar prices in MY 2014/15 will remain firm due to tighter supplies, although domestic price fluctuations can occur due to international prices. Although the gur market has been under pressure due to stronger supplies (resulting from the aforementioned higher-than-anticipated diversion of cane for gur), gur prices in MY 2014/15 will generally be driven by India’s sugar market.
Post’s forecast for sugar exports in MY 2014/15 remains unchanged at 1.5 MMT based on the assumption that the GOI will continue to subsidize raw sugar exports through September 2015. Assuming the GOI maintains its export subsidy program, which it reviews the subsidy every two months, local supplies will constrict as consumption levels continue to increase. As a result, sugar exporters (mostly raw) should see enhanced opportunities in the Indian market. As a result, Post forecast MY 2014/15 sugar imports at 1.0 MMT.
For MY 2013/14, Post increases its sugar export forecast from 1.8 MMT to 2.7 MMT based on the latest trade data. Exports of raw and refined sugar exports are likely to be relatively equal. Strong import demand from Africa, Asia, and neighboring countries, as well as the GOI’s exports subsidies, should encourage Indian shippers to export more raw sugar. During the first three quarters of MY 2013/14, India exported around 2.3 MMT of raw and refined sugar, 70 percent of which went to Iran, Sudan, Sri Lanka, Somalia, UAE, Tanzania, and Saudi Arabia.
In terms of imports, industry sources expect that India will import over 700,000 MT of sugar (mostly raw) during MY 2013/14. Most of India's raw sugar imports are sourced from Brazil.
On August 21, 2014, the GOI raised its tariff for refined and raw sugar from 15 percent to 25 percent(Customs Notification No.26/2014). The objective of increasing the tariff was to discourage imports, prevent excessive inventory, and support local sugar prices. Prior to the August 2014 change, the tariff was last revised in July 2013 (Customs Notification No. 34/2013).
Currently, sugar exporters require an Open General License (OGL) and prior registration with the Ministry of Commerce’s Directorate General of Foreign Trade for each consignment. In February 2014, the Indian Cabinet Committee on Economic Affairs authorized over 4.0 MMT of raw sugar as eligible to receive export subsidies under a new, two-year subsidy program. On August 8, 2014, the Ministry of Consumer Affairs, Food, and Public Distribution revised the raw sugar subsidy for the period of August 1 to September 30 to $55.09 (INR 3,371) per MT. The current subsidy notification is the fourth consecutive announcement since February 2014. To date, the GOI has not issued a subsequent notification for the period covering October and November.
Sugar ending stocks for MY2014/15 and MY201314 are revised down to 8.0 MMT and 7.8 MMT, respectively. The current inventory for MY 2014/15 is sufficient to meet the normal stock requirements, which is three months