Even as the International Sugar Organization (ISO) has raised its forecast for 2018-19 global sugar surplus to 1.83 million tonnes, up from its previous estimate of 641,000 tonnes, thanks to increased production in India and Thailand as well as a diminished outlook for sugar consumption, Maharashtra and Tamilnadu in India are reporting huge output cuts in sugar production this oncoming season..
Sugar production in Maharashtra, the country’s second-biggest producer, is likely to fall by 39.2 per cent year on year in 2019/20 to 6.5 million tonnes because of a drought-hit cane crop.
In Tamilnadu too, successive drought conditions for the past few years have brought the sugar industry into almost a halt. Drought conditions in Taminadu have reduced the sugarcane yield which leads to lower output per acre and has also hurt sugar recovery. Sugar recovery in the southern state averaged 9.5 per cent as against 10.5 to 11 per cent in Northern Karnataka, Maharashtra or now in Uttar Pradesh. Lack of rainfall has lowered the recovery rate further. As against the recovery rate of 9.35 per cent in 2011-12, it has been less than 8.64 per cent recently.
The drop in sugar output will ease pressure on Indian sugar mills to export surplus sugar and support global prices that fell more than 20 per cent last year.
Drought has badly affected crops in the central part of Maharashtra. The cane area has fallen and lower cane yields are being expected for the 2019-20 season. Maharashtra produced 10.7 million tonnes of sugar in the 2018/19 marketing year ending on September 30. The drought also created a fodder shortage in the state and prompted farmers to feed cane to cattle.
In the current year India is likely to produce a record 33 million tonnes of sugar, increasing inventories. Years of bumper cane harvests and record sugar production have hammered domestic sugar prices, making it hard for mills to pay money owed to farmers. To bring down cane arrears and reduce rising inventories, the government has been providing incentives to mills for overseas sugar sales and set an export target of 5 million tonnes. The drought could prompt India to reduce the export target for the next season.