Longest sugar glut in decade extends on Indian crop

Six Months

India’s production in the past season was forecast at 24.35 million tons by SGS last November. The Indian Sugar Mills Association’s final estimate was 26.2 million tons. A year earlier, SGS predicted output of 23.27 million tons and the producer group 25.5 million tons. The association lowered its estimate to 24.2 million tons six months later.

A slower-than-average start to the monsoon, which provides about 70 percent of India’s annual rainfall, may have hurt the crop more than indicated by the survey. Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., the country’s top refiner, predicts production will be 23 million tons, 9.9 percent less than the SGS estimate.

A smaller-than-expected crop may spur imports. While the country didn’t buy any sweetener last year, it purchased 2.43 million tons in 2009-2010, equal to about 8 percent of global stockpiles at the end of that marketing year, U.S. Department of Agriculture data show.

Raw Imports

India will probably produce 23 million tons this year and a possible supply squeeze in December could lift imports in the the fourth quarter, Wayne Gordon, an analyst at UBS AG in New York, wrote in an Oct. 25 report. Refiners are already using a trade regulation which allows duty-free imports of raw sugar and exports of refined sweetener, Murkumbi said in October.

Rising Indian demand for imports may not be enough to halt the rout in international prices. World supply including inventories will climb 3.7 percent to 240.6 million tons in 2012-2013 and imports will decline 6.5 percent, according to the ISO. The group, which has more than 80 member states, estimates the glut at 5.9 million tons.

Hedge funds cut bullish bets on sugar by 75 percent since early August, U.S. Commodity Futures Trading Commission data show. Open interest in raw-sugar futures declined about 8.7 percent since mid-June, bourse data compiled by Bloomberg show.

Sugar had the biggest drop this year of any of five food indexes tracked by the United Nations’ Food & Agriculture Organization. The Rome-based group’s sugar gauge slumped 13 percent through the end of September even as the combined measure across 55 edible commodities advanced 2.4 percent. The index jumped 8 percent since June as drought damage spread.

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