A multitude of factors have resulted in lower sugar output, including heavy rainfall and flooding in key sugarcane growing areas of Maharashtra and Karnataka in September, which resulted in massive crop loss. The growth in the domestic ethanol
production capacity for mixing in petrol has also contributed to the lower output.
In its July projections, ISMA had not factored in the expected diversion of B-heavy molasses and cane juice for ethanol
production, which is now estimated to lower sugar production to about 850,000 tonnes in the coming season.
According to the ISMA report today, the tender for ethanol
procurement for the 2019-20 cycle was expected to be opened by the oil marketing companies
(OMCs) shortly. According to sources, the bid for ethanol produced from B-heavy molasses and sugarcane juice is likely to be higher, giving added impetus to the diversion of cane. Ethanol is slowly disrupting the traditional sugarcane value chain and promises a viable option to hedge the sugar sector from seasonal fluctuations and export market shocks.
However, the Association said the quantum of diversion could be determined once the bids were opened, giving ISMA a window to revise the projections if needed.
Meanwhile, ISMA said the cane crop in Maharashtra and Karnataka, which together contribute 35-40 per cent of India’s annual sugar production, had been impacted, resulting in lower harvest potential due to the drought last year and flooding this year.
In Maharashtra, floods affected Kolhapur, Sangli, Satara and Pune with prolonged inundation destroying crops. As such, cane area for 2019-20 has dropped 33 per cent to 776,000 hectares from last year’s acreage of 1.15 MH. Sugar production is pegged to drop 40 per cent from over 10 MT in 2018-19 to 6.2 MT this year.
In Karnataka, the incessant downpour in August 2019 affected the northern areas in Belgaum and Bijapur districts. Therefore, sugarcane area is expected at almost 400,000 hectares against 500,000 hectares in 2018-19 season, with the sugar output
likely to touch 3.2 MT against 4.43 MT last year.
In Uttar Pradesh, the country’s top sugar producer, the acreage is seen lower compared to 2018-19. However, considering the crop and weather conditions apart from area under high yielding varieties, improvement in yield per hectare is expected. Hence, sugar production in UP is projected to touch 12 MT, nearly at the same level of 11.82 MT last year.
As per reports submitted by the mills, sugar sales during 2018-19 season was 24.6 MT. ISMA claimed some sugar mills were selling beyond their monthly quota for reasons including the ‘pressure’ to pay farmers, working capital needs, high inventory cost etc. There were market reports that another nearly 0.9 MT of sugar would have got sold over and above what had been reported by mills to the government. As such, total sale of sugar by the mills during 2018-19 season was estimated to be 25.5 MT.
Taking the opening balance of 10.7 MT in October 2018, exports of around 3.8 MT and sales of 25.5 MT, the closing balance in September 2019 was estimated to be more than 14.58 MT.
According to ISMA, several sugar companies had already finalised export contracts, and in the month of October alone, 700,000-800,000 tonnes of exports had been contracted far.