Sugar Semi-annual 2012

An Expert's View about Tropical and Subtropical Fruits, Sugar Cane in India

Posted on: 10 Nov 2012

Official statistics indicate sugarcane plantings in marketing year 2012/13 (October-September) are unchanged from 2011/12 at 5.1 million hectares.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 10/15/2012 GAIN Report Number: IN2131 India Sugar Semi-annual 2012 Approved By: Thom Wright Prepared By: Amit Aradhey Report Highlights: 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). 1 Commodities: Sugar, Centrifugal Sugar Cane for Centrifugal Production: B 1]ased on the government’s first advance estimate [ 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 sug [2]ar production in marketing year 2012/13 is forecast lower at 335 million tons [3] and 25.6 million tons, respectively (see tables 1 and 2). 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 (Table 3). (Note: Please refer to IN2058 for information on production policy). [1] http://agricoop.nic.in/ncfcweather/ncfcasSep-28-2012.pdf [2] Unless otherwise stated in context, reference to ‘sugar’ means raw sugar. [3] Government first advance estimate for crop season 2012/13 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 (Table 1). MARKET PRICES Sugar prices remained stable through June 2012, but increased in July 2012 (Table 5) on expectations of 2 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 1] sugar season [ . 1) The unsold levy quota of 200,000 tons from the April-June quarter was allowed for open market sale from July 13th 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 (Figure 1). Figure 1. India: Sugar and Gur Prices in Delhi Market, 2008-12 Source: Industry and Trade Sources [1] Rajya Sabha(Council of States), Question No 345 Trade: Imports 3 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). 4 Production, Supply and Demand Data Statistics: Table 1. India: Commodity, Centrifugal Sugar (raw value basis), PSD (Figures in ‘000 MT) 2010/2011 2011/2012 2012/2013 Sugar, Centrifugal Market Year Market Year Market Year India Begin: Oct 2010 Begin: Oct 2011 Begin: Oct 2012 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 6,222 6,223 5,798 6,299 6,528 7,700 (1000 MT) Beet Sugar Production 0 0 0 0 0 0 (1000 MT) Cane Sugar Production 26,574 26,574 28,830 28,800 29,750 25,630 (1000 MT) Total Sugar Production 26,574 26,574 28,830 28,800 29,750 25,630 (1000 MT) Raw Imports 402 402 0 100 0 500 (1000 MT) Refined Imp.(Raw Val) 3 3 0 0 0 0 (1000 MT) Total Imports 405 405 0 100 0 500 (1000 MT) Total Supply 33,201 33,202 34,628 35,199 36,278 33,830 (1000 MT) Raw Exports 1,187 1,187 0 1,077 0 800 (1000 MT) Refined Exp.(Raw Val) 2,716 2,716 2,600 2,422 2,500 1,400 (1000 MT) Total Exports 3,903 3,903 2,600 3,499 2,500 2,200 (1000 MT) Human Dom. Consumption 23,500 23,000 25,500 24,000 26,500 25,000 (1000 MT) Other Disappearance 0 0 0 0 0 0 (1000 MT) Total Use 23,500 23,000 25,500 24,000 26,500 25,000 (1000 MT) Ending Stocks 5,798 6,299 6,528 7,700 7,278 6,630 (1000 MT) Total Distribution 33,201 33,202 34,628 35,199 36,278 33,830 (1000 MT) TS=TD 0 0 0 Note: Stocks include only milled sugar, as all khandsari sugar produced is consumed within the marketing year. Virtually no centrifugal sugar is utilized for alcohol, feed, or other non-human consumption. 5 Table 2. India: Commodity, Sugarcane, Centrifugal, PSD (Area in ‘000 hectare and others in ‘000 MT) 2010/2011 2011/2012 2012/2013 Sugar Cane for Centrifugal Market Year Market Year Market Year India Begin: Oct 2010 Begin: Oct 2011 Begin: Oct 2012 USDA New USDA New USDA New Official Post Official Post Official Post Area Planted 4,940 4,940 5,090 5,090 5,250 5,100 (1000 HA) Area Harvested 4,940 4,940 5,090 5,090 5,250 5,100 (1000 HA) Production 342,380 342,380 347,870 357,670 365,000 335,328 (1000 MT) Total Supply 342,380 342,380 347,870 357,670 365,000 335,328 (1000 MT) Utilization for Sugar 240,000 240,000 260,000 270,000 270,000 240,000 (1000 MT) Utilizatn for Alcohol 102,380 102,380 87,870 87,670 95,000 95,328 (1000 MT) Total Utilization 342,380 342,380 347,870 357,670 365,000 335,328 (1000 MT) TS=TD 0 0 0 Note: Virtually no cane is utilized directly for alcohol production. ‘Utilization for alcohol’ in the PS&D includes cane used for gur, seed, feed and waste. ‘Utilization for sugar’ data include cane used to produce mill sugar and khandsari sugar. Author Defined: Table 3. India: Sugarcane Area, Production, and Utilization Sugar Cane Area/1 Yield/1 Production /1 Suga /2r Khand /3sari Gur /3 Seed/3 Million ha Tons/ha Million Tons Million Tons Million Tons Million Tons Million Tons 1985/86 2.86 59.99 171.68 68.98 10.48 71.62 20.60 1990/91 3.69 65.39 241.05 122.32 13.18 76.63 28.93 1995/96 4.15 68.02 282.09 174.76 10.00 67.27 30.06 2000/01 4.32 68.49 295.60 176.65 11.00 72.48 35.47 2001/02 4.41 67.38 297.21 180.32 10.50 70.73 35.67 2002/03 4.52 63.58 287.38 194.33 9.50 49.07 34.49 2003/04 3.94 59.39 233.86 132.51 10.00 61.35 30.00 2004/05 3.66 64.74 237.09 124.77 9.50 74.37 28.45 2005/06 4.20 66.93 281.17 188.67 8.50 50.26 33.74 2006/07 5.15 69.03 355.52 279.24 7.50 26.11 42.66 2007/08 5.06 68.81 348.19 249.90 7.00 49.50 41.78 2008/09 4.40 64.77 285.00 145.00 6.50 99.30 34.20 2009/10 4.20 66.14 277.80 185.54 6.50 52.43 33.34 2010/11 4.89 70.01 342.38 240.00 7.50 53.80 41.08 6 2011/12 5.09 70.26 357.67 270.00 7.00 37.75 42.92 2012/13 /3 5.10 65.75 335.33 240.00 7.00 47.80 40.20 Note: Figures for 2011/12 and 2012/12 are FAS estimates. Area in million hectares. Yield in metric tons per hectare. Others in million metric tons. Source: /1: Directorate of Economic and Statistics, Ministry of Agriculture /2: Indian Sugar Mills Association except 2011/12 and 2012/13 /3: FAS/New Delhi estimate Table 4. India: Mill Sugar Production by State (Figures in 100,000 tons crystal weight basis) State 2009/10 2010/11 2011/12 2012/13 Final Revised Estimate Forecast Andhra Pradesh 5.2 10.1 11.0 11.0 Bihar 2.6 3.9 5.5 5.5 Gujarat 11.9 12.4 11.4 10.0 Haryana 2.5 3.9 4.2 3.0 Karnataka 25.6 36.8 36.0 26.0 Maharashtra 70.7 90.5 90.0 64.0 Punjab 1.8 3.0 3.4 3.0 Tamil Nadu 12.8 18.5 21.0 24.0 Uttar Pradesh 51.8 58.9 70.0 75.0 Others 4.4 6.0 12.5 14.0 Uttar Pradesh 51.8 58.9 70.0 75.0 Total 189.1 243.9 265.0 235.5 Note: Excludes Khandsari sugar, as state break-up is not available. Source: /1: MYs 2009/10 and 20010/11 - Indian Sugar Mills Association /2: MYs 2011/12 and 2012/13 – FAS/New Delhi Estimate Table 5. India: Commodity, Centrifugal Sugar, Price Table Year 2010 2011 2012 Percent Change January 40000 29500 30000 2 February 35200 29650 30000 1 March 31250 30000 30250 1 April 30000 29400 29400 0 May 28500 28750 31750 10 June 28000 28300 31250 10 July 28500 29750 32300 14 August 27250 29500 37500 26 September 27500 29500 37200 26 October 28000 30750 November 30000 33750 December 31000 32000 Exchange Rate: 45.65 49.00 52.41 Local Currency/US $ 7 Note: Exchange rate for 2010 and 2011 refers to Indian Fiscal Years (IFY) 2010/11 (April/March) and IFY 2011/12 respectively. Exchange rate of 2012 refers to average for first six months. Source & Contract Terms: Indian Sugar Mills Association and NFCSF; month-end prices in the Delhi wholesale market. Table 6. India: Commodity, Gur, Price Table (Price in actual weight basis) Year 2010 2011 2012 Percent Change January 30000 24000 30000 25 February 27500 23000 28000 22 March 28000 25000 29500 18 April 28000 28000 31000 11 May 34000 32000 33500 5 June 34000 32000 34500 8 July 34000 33000 36000 9 August 34000 36000 35500 -1 September 34000 38000 34000 -11 October 30000 30500 November 25000 27000 December 25000 29000 45.65 49.00 52.41 Exchange Rate: Local Currency/US $ Note: Exchange rate for 2010 and 2011 refers to Indian Fiscal Years (IFY) 2010/11 (April/March) and IFY 2011/12 respectively. Exchange rate of 2012 refers to average for first six months. Source & Contract Term: Indian Sugar Mills Association and NFCSF; month-end prices in the Delhi wholesale market. Table 7. India: Commodity, Sugarcane, Price Table (Price in Rs. per ton) 2009/10 2010/11 2011/12 Minimum Support Price (MSP) or Fair Remunerative Price (FRP) Wheat 11,000 11,200 12,850 Rice (Grade A) 9,800 10,300 11,100 Sugarcane 1298.4 1391.2 1450.0/* State Advised Price (SAP) for Sugarcane, by State Uttar Pradesh 1650-1700 2050-2100 2350-2500 Haryana/Punjab 1850-1900 1900-2200 2200-2310 Southern State /#s 2000-2400 1750-2300 1800-2050 Notes: *: FRP for 2011/12 at 9.5 percent recovery, subject to a premium of Rs 1.53 for every 0.1 percent increase in recovery above 9.5 percent. #: Sugar mills pay market price. In 2011/12, Tamil Nadu government was paying Rs 100 in addition to SAP as transport cost. Exchange rate: 2010/11 (April-March) 1 US$ = 45.61 Indian Rupees 2011/12 (April-March) 1 US$ = 48.13 Indian Rupees Source: Indian Sugar Mills Association 8 9
Posted: 10 November 2012

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