Just like in the death overs in the game of Cricket, the ball starts to reverse swing, same is the story of the Indian Sugar Production. We are close the to the end of the current production season in India, and the production numbers are still swinging. ISMA started with 35 mmt production as their first estimate and then with the deficit rains in part of Maharashtra and heavy rains in the state of UP, the production numbers were reduced to 30.7 mmt in their latest estimate. But, the numbers look like are swinging again towards the higher side and India looks all set to beat last year’s sugar production number of 32.47 mmt and set a new record.
With all the story of drought in some of the major producing regions of Maharashtra, the bulls got excited and started talking about production as low as 8-8.5 mmt in the state at the start of harvest. To their surprise, the number was achieved by the fortnight of 15th Feb 2019, and as of 12th March, the production has already touched 9.9 mmt for the state with 75 mills reported shut.
Even if we take 50% production for another one month, we will be producing another 900 kmt of sugar which will take the number closer to 10.8 mmt beating last year number of 10.7 mmt. This is after the drought in the state which should have impacted the cane yields and lowered the production number. Being a bit pessimistic, assuming a sudden shut down of the remaining mills, the production number will still get closer to 10.5 mmt mark in the state. Range of production for the state is thus 10.5-11 mmt in the current season.
The highest producing state of the country, Uttar Pradesh, has taken all by surprise for the 3rd consecutive year especially in terms of sucrose recovery. The sugar production for the state was lagging behind last year’s number but recently, the production numbers have started to overtake last year performance and are all set to move towards the 12 mmt mark. Again assuming the mills begin to shut down quickly and production slows down, a state will not produce less than last year. There is still upside expected to the numbers as recent rainfall, and temperature pattern has been extremely beneficial for cane and only help in higher yields and sucrose recovery for the leftover cane.
Karnataka, the third largest producer, is also set to produce more sugar with a higher area under harvest this year and thanks to sucrose recovery being reported 40 basis points higher than last year. State has produced 4.2 mmt as of 28th Feb with 34 mills stopped crushing out of 72 mills in the state. The state also have a special season which will add to the production in the later half of the year thus state is week poised to produce anywhere between 4.5-4.8 mmt during the current season.
Tamil Nadu will be adding more sugar than last year with a higher area under harvest for the current season, thus we have sugar flowing rather overflowing in 18-19
With the above estimates, All India production number comes to be 33.2 to 34.0 MMT
*Figures in million metric tonnes
The sugar balance sheet for India will be oversupplied and will need an additional outflow along with domestic consumption to keep stocks and prices under check. With the higher base of production in the current season, the scope of reduction for the next year also gets small which shall mean if we have normal monsoon as expected by Skymet in their forecast, sugar surplus is there to remain.
Saviour for the industry shall be Ethanol and Exports for which the doors of the bureaucracy will be knocked continuously even in the next season to help the industry survive this plethora of sugar.
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