Crushing delay unlikely to trim India's sugar production

NEW DELHI Mon Dec 2, 2013 3:50pm IST

1 of 2. A hand-rickshaw puller waits for customers at a roadside wholesale sugarcane market in Kolkata September 16, 2013.

Credit: Reuters/Rupak De Chowdhuri/Files

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NEW DELHI (Reuters) - India's sugar production won't be affected by a nearly month-long delay in sugarcane crushing by mills due to a price row with growers as most mills have restarted operations now, a senior industry official said.

A steady output and ample stocks at the world's second-biggest sugar producer could lead to it boosting exports of the sweetener, potentially putting downward pressure on benchmark global prices in New York and London..

"As of now we do not see any loss in production or any adverse impact on exports since mills have started crushing," said Abinash Verma, director general of the Indian Sugar Mills Association, a producers' body.

In India, federal and state governments set the price sugar mills pay farmers for the cane but allow the market to determine sale prices of the sweetener.

With federal elections due next year, the government of Uttar Pradesh, India's biggest cane producing state, threw its weight behind farmers who form a major voting bloc.

Crushing was delayed as farmers in Uttar Pradesh and other states demanded an increase in the cane price to compensate for a rise in fuel and fertiliser rates, while millers refused to concede, citing falling sugar sale prices. The price of the sweetener has fallen about 8 percent in India in the past year.

On Sunday, mills in Uttar Pradesh temporarily resolved a dispute with the local government over payments to cane farmers.

In another leading sugar producing state, Maharashtra, mills began crushing cane on Sunday after a leading farmers' organisation suspended protests that had kept factories idle.

India, the world's biggest sugar consumer, started the current year beginning October 1 with carry-forward stocks of 8.8 million tonnes. The country is likely to produce 25 million tonnes this year, compared with its annual sugar consumption of around 23 million tonnes.

The surplus gives India an opportunity to export 3 to 4 million tonnes in 2013/14, but, to make that viable, global prices need to rise from the current level, Verma said. Global sugar prices have fallen 12.5 percent since January 2013.

"India needs to export 3-4 million tonnes of sugar but global prices are weak. Mills will have to think about exports of at least that much to remain in good shape. How mills are going to do that and when, are two big questions," he said.

India competes with Thailand, Brazil and Pakistan in the world market. This year all key producers are expected to have surplus, intensifying a battle to gain market share in key importers such as Indonesia. (Reporting by Mayank Bhardwaj; Writing by Rajendra Jadhav; Editing by Muralikumar Anantharaman)

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