(Bloomberg) -- Sugar output in India's second-biggest producing region will be lower than expected after floods damaged crops and as some farmers sell cane for feed.
Production in the western state of Maharashtra may total 5.2 million to 5.3 million tons in the year starting Oct. 1, compared with a previous estimate of 6.44 million tons, said Shekhar Gaikwad, the state's sugar commissioner. The new total is half last year's 10.7 million tons, according to Gaikwad.
About 100,000 hectares (247,105 acres) out of 843,000 hectares of cane that will be available for crushing next season have been hit by flooding caused by excess rain last month, Gaikwad said. Rain in Maharashtra has been about 30% above normal since June 1, according to the weather office.
Prolonged dry weather earlier on caused cattle fodder shortages in the state. That's helping farmers get attractive returns by selling cane for feed. Cane prices, fixed by the government, generally stay above fodder costs, except in unusual years when poor rains boost feed prices. India, which vies with Brazil as the top producer, swings between importer and exporter, depending on output.
Farmers in Maharashtra are selling cane in the cattle-feed market for as much as 3,500 rupees ($49) a ton compared with a government-set price of about 2,750 rupees they expect from sugar mills in 2019-20, Gaikwad said. The Maharashtra government will officially release its new sugar output estimate within a week, he said.
White sugar futures climbed to the highest in more than three months in London on Monday. The December contract gained 1.1% to close at $329.30 per ton, the highest level for the most-active contract since June 20. Raw sugar for March delivery advanced 1.2% to 12.21 cents per pound in New York.
Cattle Shelters
As many as 1,400 cattle shelters have been set up across the state to feed about 350,000 animals amid a shortage of fodder. Another benefit is that farmers are getting paid in cash for fodder, where as sugar mills pay in installments, he said.
“Both ways it's good, as animals are getting fodder and at the same time the sugar surplus will be reduced,” Gaikwad said.
Inventories are expected to remain high despite predictions that sugar output may drop to a three-year low of 28.2 million tons in 2019-20 from a record 32.95 million tons this year after dry weather parched fields, according to the Indian Sugar Mills Association. A bigger drop in production will reduce the record surplus, potentially curbing exports and supporting global prices.
India's sugar exports may climb to between 3.7 million and 3.8 million tons this year, with mills asking the government to help ship a record 7 million tons in 2019-20. India approved incentives worth 62.68 billion rupees last month to subsidize exports of as much as 6 million tons of sugar in 2019-20. The government will reimburse a portion of local and ocean freight charges and expenses related to handling, upgrading and processing sugar.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Atul Prakash
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