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India, the No.2 sugar producer, has been a net exporter of the sweetener for the past six years.
It is set to ban exports in the crop year starting in October and may even force imports next year as farmers turn to other crops, according to interviews with traders, industry officials and farmers.
The drop in production is driven by unusually dry conditions, fueled by El Niño in the western state of Maharashtra and its neighbor Karnataka to the south, which together with Uttar Pradesh in the north account for more than 80% of Indian sugar production.
Reuters spoke with more than 200 farmers during a recent visit to Maharashtra and Karnataka.
India produced 33.1 million metric tons of sugar in the year that ended in September, behind only Brazil's expected 46.9 million tons.
India supplies 12% of globally traded sugar. It has exported an average of 6.8 million tons of sugar over the past five years, making it the No.2 shipper in that period. It was surpassed last year by Thailand.
The Indian Sugar Mills Association said in August net production could fall to 31.7 million tons in the year that began in October.
More than 180 farmers from 11 cane-producing districts of Maharashtra and another 49 farmers from Karnataka all told Reuters lower monsoon rainfall during the crucial growth phase stunted crop development. Reuters spoke with at least 10 farmers in each of the districts that account for most production in the two states. India is home to some 50 million sugar farmers.
Reuters calculated the drop in per-acre cane yields and likely drop in the next year's cane area using an average derived from responses received from farmers scattered across key growing districts, cultivating different kinds of cane varieties. Some varieties mature in 10 months, while others take up to 18 months.
Internal forecasts from five trading houses for this year's output range between 29 million and 30 million tons. Reuters calculations based on farmer interviews found output could drop 12.2 percent this year to 29.05 million tons.
Output could fall further the following year, with three houses predicting a crop in the 25 million to 26.9 million ton range, also in line with Reuters' calculations for production of 26.6 million tons.
India's sugar consumption is set to hit a record 29.2 million tons this year, rising to roughly 30 million tons the following year, according to traders' forecasts.
In Maharashtra, the lower rainfall led to a 16% average drop in cane yield, with some regions experiencing declines of up to 40 percent, according to farmers.
A 10 percent decline in cane area in Maharashtra, according to a government official, coupled with potential diversions for fodder and jaggery-making in 2 percent of the crop, would lead to a 28 percent reduction in net sugar production in the state to 7.55 million tons this year, based on Reuters calculations.
Karnataka faces a 13 percent reduction in cane cultivation area and anticipated yield drops of 25 percent for the current year, according to the survey of farmers. That indicates a potential decline in sugar production to 3.7 million tons.
However, Uttar Pradesh, with better irrigation, is expected to deliver a 9.7 percent increase in output to 11.5 million tons this year, rising to 12.4 million tons next year due to lower sucrose diversion for ethanol, according to tradehouses.
Farmers across key growing areas of the two states, grappling with water scarcity, told Reuters they plan to either reduce cane cultivation or abandon it.
Calculations based on their feedback could result in a potential 32 percent reduction in Maharashtra's sugarcane area and a 29 percent decrease in Karnataka's for the marketing year starting October 2024. Several factors, including rainfall in next year's monsoon, will ultimately determine the crop size.
Shrinking planting could slash Maharashtra's production next year to 5.1 million tons and Karnataka's to 2.6 million tons, which would be their lowest since the 2016/17 crop year.
The availability of ratoon crops is also expected to drop as many farmers were forced to uproot the plants because of water scarcity. Ratoon is the cane root stub after the first harvest, which remains in the ground for a second harvest.
Maharashtra mills said that the sugar recovery rate - the amount extracted from cane during milling - is lower than normal due to higher temperatures.
For the 2023/24 period, the government's recent decision to limit the diversion of sugar up to 1.7 million tons for ethanol production has been factored in.
For 2024/25, it is presumed the government will prohibit ethanol production from B-heavy molasses and cane juice/syrup.
Source: Online/GFMM
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