Indian farmers may reap at least 6 percent more sugar than forecast by the government and industry, extending the longest global glut in more than a decade and a bear market that began in September.
Output in the world’s second-biggest producer will reach 25.53 million metric tons in the season that began Oct. 1, according to a survey of 820 farmers across an area responsible for 93 percent of national output by Geneva-based SGS SA for Bloomberg. While that’s 2.6 percent less than a year earlier, the government expects output of 23.5 million tons and the Indian Sugar Mills Association predicts 24 million tons.
The extra sweetener would expand global supply already forecast by the International Sugar Organization to reach a record this season. Producers from Russia to Thailand raised output after prices averaged the most in three decades in 2011. Futures fell 28 percent since March on prospects for a third straight annual surplus, helping to contain the surge in global food costs caused by droughts in the U.S., Europe and Australia.
“If the actual crop is going to be more than expected it’s detrimental for the world market,” said Sergey Gudoshnikov, a senior economist at the ISO in London who has studied the commodity for about three decades. “For the time being the world sugar market is still in surplus.”
Raw-sugar futures fell 19 percent to 18.83 cents a pound this year on ICE Futures U.S. in New York. Prices, which reached 36.08 cents in February 2011, the highest since 1980, may drop to 18 cents by the year-end, based on the median of 15 trader and analyst estimates compiled by Bloomberg last month. It’s this year’s third-biggest decliner in the Standard & Poor’s GSCI Spot Index of 24 commodities, behind coffee and cotton.
Sugar’s slump this year contrasts with an 11 percent gain in the S&P GSCI Agriculture Index of eight commodities, as the worst U.S. drought since 1956 parched wheat, corn and soybeans. The MSCI All-Country World Index of equities rose 8.7 percent since the start of January as Treasuries returned 2.4 percent, a Bank of America Corp. index shows.
Farmers may harvest 381.7 million tons of cane this season, 6.7 percent more than last year, according to the SGS survey from Sept. 25 to Oct. 18 across six states. About 65 percent may be crushed for sugar, according to SGS, which used the average recovery rate of 10.34 percent over about the past decade for its output estimate. The rest will be used for jaggery, a local sweetener, livestock feed and seeding.