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Indian sugar output to hit six-year high, despite monsoon setbacks

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Indian sugar output will recover more than thought in newly-started 2017-18, lifted by higher-than-expected cane area, and diminishing the country's need for imports.

The US Department of Agriculture's New Delhi bureau pegged at 27.7m tonnes sugar output in India, the second-biggest producing country, in the marketing year which started this month – a rise of 25% on last season's result.

The upgrade took the production forecast well above the 25.8m-tonne figure that the USDA has officially factored in, besides lifting it too to the biggest volume in six years, and the third largest on record.

And it reflected ideas of cane area rising further than had been thought, by 14% to 5.0m hectares, and with much of that of "high yielding, short-duration" varieties.

'Good water storage'

This was particularly true in Uttar Pradesh, the north eastern state which is India's top cane grower, and where 2017-18 sugar output will be the "highest in decades", the bureau said.

This forecast defies a weak monsoon in the region, with rainfall levels up to two weeks ago running 30% behind normal, since the rainy season started in June.

However, "good water storage, above a 10-year average, across major reservoirs in North India, plus recent weather reports of late withdrawal of monsoon from north west India…. should bring some relief [for] soil moisture", the bureau said.

Farmers have been encouraged to sow cane by a drop, in Uttar Pradesh particularly, in the level of arrears of mill payments to farmers for crop.

'New seed varieties'

The USDA forecast for India's sugar output is larger than that from some other commentators, with S&P Global Platts's Kingsman division, for instance, last month pegging production at 25.5m tonnes, on a tel quel basis, although this represented a rise of 27% year on year on its estimates.

The figure included a 9.5m-tonne forecast for output in Uttar Pradesh, where it forecast a "record high" cane crop despite the weak monsoon.

"The lower rainfall in Uttar Pradesh is to a large extent offset by new seed varieties, which have helped the industry mitigate the risks of weather, and [by] drip irrigation," the analysis group said.

Trade outlook

India looks on course to import 1.50m tonnes of sugar in 2017-18, the bureau said – a forecast 200,000 tonnes below that the USDA is factoring in, and representing a 1.0m-tonne decline year on year.

And this includes the 300,000 tonnes of raw sugar that India's government last month permitted for import, above the 1.20m tonnes seen being brought in solely for processing and re-export.

India's sugar trade prospects are closely watched by the market, given the country's swing historically been being a substantial net exporter of the sweetener, as in 2015-17, and a net buyer, as last season.

By Mike Verdin

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