Sugar mills' body lowers output estimate to 32.8 million tonnes due to bad weather

Raw sugar prices have cooled off after hitting an 11-year high in April even as key sugar producers have cut output estimates.

The Indian Sugar Mills Association (ISMA) also lowered its sugar production estimate to 32.8 million tonnes for the current marketing year, which ends in September. It had earlier projected an output of 34 million tonnes.

So, what is it that is impacting the sugar prices and why are experts expecting lower output this marketing year? To discuss this, CNBC-TV18 spoke to Aditya Jhunjhunwala, President of ISMA, and Atul Chaturvedi, Executive Chairman of Shree Renuka Sugars.

According to Jhunjhunwala, the final sugar production estimate for the current marketing year is 32.8 million tonnes due to a slight decrease in yield in Maharashtra caused by late rains and climatic conditions.

“The yield went down a little bit in Maharashtra, though we anticipated that acreage remained the same, but there was some kind of a downtrend on the yield because of the late rains and climatic conditions,” he said.

However, Jhunjhunwala noted that the sugar balance sheet in India looks normal and a lot of companies have invested in ethanol production, with 4 million tonnes of sugar being diverted to ethanol last year.

“Last year, if you see and compare this year, there's a big jump — we have diverted 4 million tonnes of sugar to ethanol. So the total conversion of ethanol is getting better; the total supply is better. And the price in the sugar market also on a reasonable price level, though still below the industry expectation and as compared to the FRP being announced by the government,” he said.

Chaturvedi stated that Indian exports were done by March and that the increase in international prices and marginal domestic price rise were helping the Indian sugar industry.

“Indians had done away with all their exports, up to March. Our maximum exports actually happen by March and the trickle-point effect has not really worked in India's favour. The only thing which has worked is international prices being moving northwards, and domestic prices have also risen marginally in support. So that is what is coming handy as far as the Indian sugar industry is concerned,” he added.