Insight Focus
Sugar export margins have improved in the past week. This could encourage mills to ship the new 0.5 million export quota, particularly as they may be under pressure pay farmers for cane. For the conflict in the Persian Gulf to lead to more ethanol production the government will need to increase ethanol prices.
Smaller-than-expected Sugar Output Supports Indian Domestic Prices
By the end of February, India had produced 24.6 million tonnes of sugar. However, recent crushing rates have tailed off, a trend that’s been widely attributed to early flowering of sugarcane induced by heavier than normal post-monsoon rains.
However, there are also reports of sugarcane being diverted to supply jaggery producers rather than sugar mills. If this is the case, it raises concerns about mills’ financial ability to pay farmers for cane, as well as farmers’ capacity to hold out for delayed cane payments. This is because jaggery producers pay farmers upfront whereas sugar mills tend to build up arrears to farmers that they clear over time. Higher cane prices paid by sugar mills usually mean farmers would rather hold out for payment rather than sell to jaggery producers for cashflow.
We have revised down our Indian sugar production estimate to 30.2 million tonnes based on the number of mills that are still in operation and their likely production during the rest of the season. However, if the recent fast pace of mill closures continues, we may need to revise lower once more.
