Sugar Output Drops 2.5% in India on Delayed Crushing

By Thomas Kutty Abraham

Feb. 4 (Bloomberg) -- Sugar output in India dropped in the first four months of the season that began Oct. 1, worsening a shortage that’s doubled retail prices in the world’s biggest consumer of the commodity, a producers’ group said.

Mills produced 9.7 million metric tons in the October- January period, down from 9.95 million tons a year earlier, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said in a phone interview from New Delhi today.

Sugar has more than doubled in the past year, reaching a 29-year high on Feb. 1, as adverse weather reduced output in Brazil and India, the top producers. Global demand for sugar will exceed supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.

“The global price outlook for sugar remains strong, with other major sugar-producing regions such as Brazil also seeing a drop in production,” Fitch Ratings said in a report today.

Raw-sugar futures for March delivery lost as much as 2.2 percent to 27.95 cents a pound in after-hours trading in New York today. Yesterday, prices fell 2.8 percent to 28.58 cents, the biggest drop for a most-active contract since Jan. 27.

In India, immediate-delivery sugar fell for a third day, losing 1.7 percent to 3,736.65 rupees per 100 kilograms, the lowest level in a month. Prices are still up 73 percent in the past year because of a shortfall in domestic supplies.

‘Better Visibility’

“The deficit has translated into high prices and Fitch expects prices to remain high,” in the 2010 and 2011 seasons, the rating agency said. Prices may ease in the second-half of the next crop year because of a “better visibility of cane output and a declining supply deficit.” For now, higher prices may help Indian producers maintain “strong” earnings, the agency said.

Bajaj Hindusthan Ltd., India’s biggest mill, returned to profit in the three months to Dec. 31 and Balrampur Chini Mills Ltd., the second-largest, reported a 49 percent increase in net income to 765.5 million rupees. Profit at Shree Renuka Sugars Ltd. surged to 2.61 billion rupees from 110 million rupees.

Production next year may jump to 21 million tons as farmers plant more acres to benefit from record prices, Kumar said.

Last Updated: February 4, 2010 05:52 EST