Some Very Hungry Cows May Rescue India From a Giant Sugar Glut

(Bloomberg) -- India's second-biggest sugar producing region is facing an unusual situation: Attractive returns in the cattle-feed market are prompting farmers to sell sugar cane as fodder.

That may cause sugar output in Maharashtra to drop below an earlier estimate of 6.44 million tons for the year starting in October, said Shekhar Gaikwad, the state's sugar commissioner. He declined to give a new forecast. That compares with 10.7 million tons produced a year earlier, he said.

“A lot of cane got cut for fodder in the last one month,” Gaikwad said by phone. “Farmers are more than willing to sell cane for cattle feed as it's more profitable for them.”

Sugar cane prices, which are fixed by the government, generally stay above fodder prices, except in some unusual years when poor rains boost prices of cattle feed ingredients. India, which jostles with Brazil as the biggest producer, swings between being a sugar importer and exporter, depending on the size of local output.

A setback in the western state could further hurt the country's total output. India is expected to see its sugar production dropping to a three-year low of 28.2 million tons from a record of 32.95 million tons this year, according to the Indian Sugar Mills Association. A bigger drop in production may reduce the country's record surplus, potentially curtailing exports and supporting global prices.

Weather Woes

Maharashtra is facing a shortage in fodder after several months of dry weather. The arrival of the monsoon brought some relief, but several areas are still suffering from scant rains.

The Marathwada region's rainfall since June has been 29% lower than normal, while Vidarbha saw rains that were 19% below average, according to the India Meteorological Department. Total rainfall across the state has been 7% more than normal since June 1.

Sugar cane crushing in Maharashtra is likely to be delayed by a few weeks as the mills may wait for the plants to mature further for the chance of a better sugar recovery, Gaikwad said.

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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