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India's 2020/21 sugar production forecast to rise 12% on year to 30.5 million mt: ISMA

Highlights

High production in Maharashtra and Karnataka

Exports for next season forecast at 6 million-7 million mt

Domestic demand improves from end May as lockdown eases

Singapore — India's sugar production is forecast to rise 12% year on year to 30.5 million mt in the October 2020- September 2021 season, according to projections from the Indian Sugar Mills Association or ISMA on June 25.

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The increase will be mainly from key producing regions, particularly Maharashtra and Karnataka, where in the previous season the cane crop was hit by drought and poor monsoon.

Net cane area in Maharashtra has increased by 43% for 2020/21 amid a better-than-average Southwest and Northeast monsoon and normal rainfall over January-March 2020.

Production in Karnataka is estimated at 4.31 million mt in the upcoming season, up 26% year on year, attributed to timely and sufficient rainfall.

India, the world's second-largest sugar producer after Brazil, is set to export a record 6 million-7 million mt in 2020/21, up from 5.2 million the year before, ISMA estimates.

Higher production in India will likely put the country in an advantageous position for export sales given the tight supply situation in Thailand.

"There is an opportunity for India to export sugar to Asia as Thai exports could fall below 6 million mt," said Abinash Verma, Director General of ISMA.

Trade analysts noted that while production was set to recover, export volumes would also have to increase to prevent heavy stockpiling of sugar in the country.

"The sugar subsidies will be announced later this year, probably in Q3. We are expecting India to carry on exporting next year on the assumption that the government will continue to provide subsidies," a Singapore-based trader told S&P Global Platts.

The government is currently in talks to increase the minimum selling price or MSP from Rupees 31/kg to Rupees 33/kg, which could potentially dampen exports in 2020/21.

Sugar demand dwindled from late March amid the coronavirus pandemic, but has since recovered with domestic sales improving in late May as the government eased lockdown restrictions.

India's opening stock for 2020/21 is seen at 11.5 million mt, down 21% on the year, mainly due to lower output and strong export sales in the 2019/20 marketing year.