The country is facing a sugar glut following a record harvest of more than 30 million tonnes in the 2006-07 crop year ended September 30, while annual domestic demand stands at only 20 million tonnes, a top industry official said.
According to an Indian Sugar Mills Association forecast, sugar output in the 2006-07 sugar crop year ending in September will total around 30 million metric tonnes, down from an ISO estimate of 33 million tonnes.
This is primarily because more sugarcane farmers in the main sugar growing state of Uttar Pradesh are shifting to wheat cultivation.
"Some sugar farmers have already started selling their sugarcane to mills at less than half of the current state-recommended price of Rs 1,250-Rs 1,300 per tonne since they are keen to clear their land to start cultivating wheat for which the minimum support price (MSP) has been increased," the National Commodity & Derivatives Exchange Ltd (NCDEX)'s economist Sonu Mehta said.
India's production forecast is at a record 33.15 million tonnes, raw value up 2.55-million tonnes from the previous year.
World sugar production is expected to reach a new record of 16.58 million tonnes, 4.076 million tonnes up from the last season, according to International Sugar Organisation's (ISO) first assessment of the upcoming 2007-08 crop cycle (Oct-Sep).
World consumption is put at 158.78 million tonnes, raw value up 2.30 per cent from the previous season, ISO said in its quarterly market outlook.
Record production is also anticipated in Brazil, China, Indonesia, Pakistan and Thailand although the industry expansion is expected to slow down there in 2008 due to less remunerative prices for sugar.