SUGAR

SugarM200 Aug contract at NCDEX ended almost flat supported by expectation a drop in plantings would lower the output in the coming year. Output was expected to decline for two years in a row after a record production of 28.4 million tones last year.

Planting of cane dropped by 17.2 percent to 4.28 million hectares on July 3 from 5.17 million hectares a year earlier, farm ministry data showed on Friday. Farm Secretary P.K. Mishra said on Tuesday the sugarcane acreage was likely to be lower than a year ago because of lower sugar prices.
The drop in prices seen temporary because farmers in the key producing state of Maharashtra in western India were expected to switch to other crops liked soybean because of better prices. A senior industry official said. Maharashtra state may produce a record 9.4 million tones in the year ending September, against last year's output of 9.1 million tones.

According to industry estimates India, the world's No. 2 sugar producer after Brazil, is likely to produce about 26-27 million tones in the year ending September, lower than last year's 28.4 million tones last year. India's sugar production is expected to drop to 21-22 million tones in 2008/09, from 26.5 million tones in the current year, Shanti Lal Jain, director general of the Indian Sugar Mills Association (ISMA), told Reuters last month.

According to an ISO forecast late week, there will be a deficit in global sugar supply in 2008/09, after a surplus in 2007/08.

supportive factor for sugar future is skyrocketing crude oil prices which hit its all time high above $146/barrel and India allowed production of ethanol, a biofuel directly from the sugarcane juice and has made 5% blend mandatory.

Last month, the federal government kept the minimum price for sugarcane unchanged at 81.18 rupees per 100 kg for 2008/09 season.

India has contracted to export around 3 mln tones of sugar in this crop season and expects to sell another 500,000 tones, beating earlier forecasts, a senior trade official told Reuters last.

Different production figures always create confusion in market. In January, the government said India would produce 26 mln tones in the crop year ending in September. However, the Indian Sugar Mills Association (ISMA) said in Mar that output would be at least 27.5 mln tones for the year, almost 6% above the govt's estimate.

Farm Minister Sharad Pawar said, sugar output was likely to be 26 million tones in the crop year to September, nearly 12% lower than earlier forecasts and below year's 28.4 million tones while at the beginning of the current season. Following a delay of crushing in key growing regions the forecast was later revised down to 28-29 million tones.

Prakash Naiknavare, managing director of the Maharashtra State Co-operative Sugar Factories Federation said sugar production of about 28 million tones in the 2007/08 crop year that began on Oct.1, below earlier estimates of 32 to 33 million tones and slightly lower than 28.4 million tones in 2006/07.

Brazil’s center-south sugar output in 2008-9 is forecasted to reach 26.35 mln tones, up a tad from 26.04 mln tones a year ago.

India, consumes about 19-20 mln tons of Sugar annually which expect to produce more than 28 mln tons in the current crop year that ends in Sep.