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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


25 October 2012

USDA GAIN: India Sugar Semi-Annual 2012USDA GAIN: India Sugar Semi-Annual 2012

This report updates IN2058. Official statistics indicate sugarcane plantings in marketing year 2012/13 (October-September) are unchanged from 2011/12 at 5.1 million hectares. Production is forecast at 335 million tons, down 6% compared to last year. Centrifugal sugar production is expected to drop 11 percent to 25.6 million tons (raw value). 2012/13 sugar imports are forecast at 500 thousand tons. Higher beginning stocks and a comfortable supply situation will encourage 2012/13 sugar exports to 2.2 million tons, compared to 3.5 million tons in 2011/12 (through August 2012).
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Commodities:

Sugar, Centrifugal
Sugar Cane for Centrifugal

Production:

Based on the government’s first advance estimate [1] for crop year 2012/13 (July-June), sugarcane has been planted on 5.1 million hectares, marginally higher than 5.08 million hectares the previous year. As anticipated, below normal rains in the first half of monsoon season (June-September) discouraged additional sugarcane planting, particularly in Maharashtra and Karnataka. (Combined June and July rainfall for these states was just 65% of the normal level and cane planting dropped more than 7% compared to last year). Encouraged by normal rains and higher cane price payments, farmers in Uttar Pradesh planted additional area to sugarcane (up 7.5% over last year), which partially compensated the drop in acreage in other major cane growing states.

Maharashtra, one of India’s largest sugar producing states, has been facing acute water scarcity since January 2012. Below normal rains in June and July further compounded Maharashtra’s concerns over drinking and irrigation water availability. Forage declined and some cane was diverted to cattle feed. In response, the Maharashtra government opened forage depots in drought affected regions, providing free green forage and water to cattle owners as drought relief measures. This will likely reduce the net area planted to cane and bring down its availability for crushing.

Given these factors, total sugarcane and centrifugal sugar production in marketing year 2012/13 is forecast lower at 335 million tons and 25.6 million tons, respectively. Based on official estimates (India’s fourth advance estimate for 2011/12), 2011/12 sugarcane production has been raised by 10 million tons to 357.7 million tons. (Note: Please refer to IN2058 for information on production policy).

Consumption:

Post’s 2012/13 consumption estimate has been lowered to 26 million tons on expected tight supplies, while 2011/12 consumption has been trimmed to 24.7 million tons due to higher than anticipated exports.

Market Prices

Sugar prices remained stable through June 2012, but increased in July 2012 (Table 5) on expectations of lower 2012/13 sugar production due to low rainfall. In response to increasing prices, the Government of India allowed sales of additional sugar quota through its sugar release mechanism in order to help ease prices. (See GAIN report IN2058 for more information on government quotas for Public Distribution System sugar). The following measures were taken by the Indian Government to improve availability and control sugar prices during the 2012/13 sugar season.

  1. The unsold levy quota of 200,000 tons from the April-June quarter was allowed for open market sale from July 13 th through August 14, 2012.
  2. Sugar mills were directed to sell at least 70% of their July-September quota by August 31, 2012 vide order dated July 24, 2012.
  3. An additional 400,000 ton quota (to be sold by August 31) was released on August 07, 2012. A total of 21.31 million tons of sugar was released for domestic consumption during 2011/12.
Currently, sugar prices in India’s major domestic wholesale market range from $660 to $720 per ton. Although end season gur prices are relatively stable (Table 6) due to lower end season production, gur prices in marketing year (MY) 2012/13 will largely be guided by sugar price movements.

Trade

Imports

2012/13 imports are forecast at 500 thousand tons, indicating lower production. 2011/12 imports are increased to 100 thousand tons, reflecting trade data. 2010/11 imports remain unchanged at 405 thousand tons.

Exports

Higher beginning stocks and a comfortable supply situation will encourage 2012/13 sugar exports to 2.2 million tons (raw value), compared to 3.5 million tons in 2011/12 (through August 2012). Industry sources expect September 2012 shipments to be minimal. 2010/11 exports remain unchanged at 3.9 million tons.

Trade Policy

In an effort to expand domestic supplies, India extended its zero import duty on raw and white sugar through June 30, 2012 (Customs Notification No. 25/2012). On July 1, 2012, the Indian Government changed course, imposing a 10% duty on sugar imports due to anticipated higher domestic sugar supplies in the first three quarters of MY 2011/12. The relevant notification is available at Customs Notification No 45/2012.

With international raw sugar prices falling $150 per ton lower than domestic prices (during the week of October 5, 2012), imports have become viable. Industry observers believe that if the Indian rupee continues to strengthen relative to the U.S. dollar, then refiners in Maharashtra and Karnataka will import raw sugar. This will increase India’s domestic capacity utilization, (which is facing short sugarcane supplies) and will also help keep domestic food inflation in check, especially with the start of the festive season (September-March). Since June 2012, the Indian rupee has gained more than 6 percent relative to the U.S. dollar.

In May 2012, the Empowered Group of Ministers liberalized sugar exports, allowing them under open general license. This was formalized by the May 11, 2012 Department of Food and Public Distribution Notification Order S.O. 1059 (E), abolishing the requirement to obtain export release orders from the Directorate of Sugar for the 2011/12 season. (Previous export release orders under open general license 5 can be viewed at Export Release Order 2012). The decision was intended to help the sugar industry liquidate surplus stocks and settle their arrears. On May 14, 2012, however, the Ministry of Commerce required millers to register their export contracts (Notification No. 117 (RE-2010)/2009-2014)). Sugar mills and exporters are thus free to export sugar as per their commercial interest, although the Indian government is monitoring exports closely. Note that recent press reports indicate that 2012/13 sugar exports will likely continue under open general license.

Stocks:

2011/12 sugar ending stocks have been raised to 6.5 million tons. 2012/13 ending stocks are forecast at 7 million tons, which is sufficient to meet the normal stock requirements (3 months consumption).

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