SUGAR MARKET SCENARIO IN INDIA

Indian sugar market scenario

India is the world's largest sugar consumer, accounting for 15% of global consumption.

In India sugar production follows a 5-7 year cycle. Sugar production increases over a 3-4 year period, reaches a high, which in turn, results in lower sugar prices. Lower sugar price and increased sugarcane arrears results in lower sugarcane production for the next 2-3 years. And the sugar prices shoot up and the area under sugarcane rises during the next season. As a result Sugar in India is also a huge 'swing producer' - severe year-to-year production fluctuations affects its trade status and in turn global prices of sugar. 

The Indian sugar industry remains the second largest rural agro-industry after cotton textiles. With over 600 operating sugar mills across India, about 50 million sugarcane farmers and a large number of agricultural labourers are involved in sugarcane cultivation and ancillary activities; the industry remains a potent rural economy driver.

Sugar trading in India is not easy as its price affects the budget of common man in India hence; it is a politically sensitive commodity. Currently all aspects of sugar industry be it production consumption or sales is controlled. However growing market pressure has made government look into partially decontrol the industry. 

Sugar production is expected to fall by one million tonnes in the next 2012-13 marketing year starting October to around 25 million tonnes, on likely dip in output in Maharashtra and Karnataka, an industry body said.

In the current marketing year (October-September), sugar output is pegged at 26 million tonnes. Of which, mills have produced 25.5 million tonnes till May of this year, it said.

"In the 2012-13, we are expecting production to be on lower side around 25 million tonnes as Maharashtra and Karnataka, have received very less rains so far this year," National Federation of Cooperative Sugar Factories (NFCSF), Managing Director Vinay Kumar told PTI.

Production in Maharashtra, the country's biggest sugar producing state, is expected to decline by 10% from over 9 million tonnes estimated for this year, as sugarcane yields could suffer due to less rains, he said.

A similar trend of fall in production is expected in Karnataka in the 2012-13 marketing year, he said. The state is estimated to produce 3.8 million tonnes of sugar this year.

However, sugar production in Uttar Pradesh, the country's second largest sugar producing state, is seen to be at around the current year's level of 6.8 million tonnes, he added.

Kumar said, "Planting of sugarcane is still going on in Maharashtra and Karnataka. But rains in these two states have been less by 10% so far. Higher sugar production will all depend on productivity of sugarcane."

Sugarcane is planted in Maharashtra and Karnataka for 11 months. In northern states, sugarcane planting has almost been completed. While the first round of planting of cane undertook between September and November last year, the second round of planting ended last month, an agriculture scientist said.

According to the government data, sugarcane has been planted in 5.17 million hectares as on June 15 of 2012-13 crop year as against 4.94 million hectares in the year-ago period.

The country's 2012-13 sugar production will, however, be higher than the country's annual demand of 22 million tonnes.

Sugarcane is the main sugar producing crop that contributes nearly 75% to the total sugar pool at the global level. It, Saccharum spp. Complex, is the prime source of sugar in India. Sugar is a commodity of mass consumption and the cheapest source of energy in India, supplying around 10% of the daily calorie intake. India is the second largest producer of sugar, falling marginally behind Brazil, and also the largest consumer of sugar in the world, with the demand nearly equaling the supply in most cases.

Depending upon the variety and sowing time it takes about 12 to 18 months to mature. In general January to March is the period of planting and November to March is the period of harvesting. In some states sugarcane, is grown around the year. Crushing usually begins within a month after the harvesting begins and continues throughout the year. Sugar comes in three forms: Large crystals (L-grade), Medium crystals (M-grade) and Small crystals (S grade). M and S grades form about 80% of total sugar production and are traded on the NCDEX platform. The quality of sugar is gauged using a parameter known as the ICUMSA number, which assesses the chemical properties of sugar for grading. The lower the ICUMSA number, the better the quality.