India -- Sugar Demand to Outpace Drought Production

February 12, 2013 09:20 AM


Sugar demand in India is expected to outpace production as monsoon rains in key areas continue to disappoint. A recent Bloomberg article estimates that India will consume around 23 million metric tons(MMT) of sugar in 2013/2014 but will produce only 20-21 MMT during the upcoming year. With any luck, the resulting declines in farm income will lower the price of fertilizer in India as well. But with a top-heavy government fertilizer subsidy program already staggering under its own weight, top-down price relief may not come.

In the United States, fertilizer pricing is coupled with corn futures so that when actual production history puts dollars in the pockets of growers, they base inputs purchases on expected new-crop revenue. With actual cash-on-hand and high expected new-crop revenue, U.S. growers can gauge how much NPK their annual budget will allow, and make sound business decisions.

Growers in India do not have the luxury of actual production dollars or expected new-crop revenue when it comes to sugarcane. In 2012, because of drought hardships, the government subsidized purchases of mature sugarcane for animal fodder and as the monsoon drought continues, more fodder shortages are expected later this year.

A sugar industry expert says new sowings of sugarcane are already down by as much as 50% as drought forces growers to concentrate on growing cattle rather than crops. This is a dangerous cycle in a nation that is already struggling economically on the farm.

If India -- the world's top consumer of sugar -- is forced to import sugar from sources like Brazil rather than growing cane, prices threaten to soar and could impact global sugar pricing. In 2009, sugar futures rocketed to 30-year highs as drought compelled dramatic increases in sugar imported to India.

Farmers in India cannot afford to gamble on the weather. Nor can they afford to plant sugarcane for cattle feed. In times when drought's grip is so tight that drinking water is scarce, even the sweet things in life turn to dust. With actual production dollars in decline and dismal expected new-crop revenue, increased sugar imports seem a near certainty in India's future -- along with more government subsidies.

  Photo credit: Meanest Indian / / CC BY-ND

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