Sugar prices in India, the world’s biggest user, may be 8 percent higher on average next year as a decline in output squeezes supplies, Bajaj Hindusthan Ltd., country’s biggest producer, said.
Prices may average 26,000 rupees ($525) a metric ton in the year from Oct. 1, compared with 24,000 rupees likely this year, Bajaj told investors in a note. Sugar has averaged 20,060 rupees this season on the National Commodity & Derivatives Exchange Ltd.
Raw sugar in New York reached a three-year high this week on speculation a decline in India’s production may worsen the first global supply deficit in three years. Demand worldwide may top output by 7.8 million tons in the year to Sept. 30, compared with a previous estimate of 4.3 million tons, the International Sugar Organization has said.
“The sugar industry has passed through difficult times in the past two years and all indicators suggest that the situation should correct in sugar season 2009-10 and 2010-11,” Bajaj said.
India’s cane output declined after the government raised the minimum price for competing crops such as wheat in a bid to bolster grain output, according to Czarnikow Group Ltd. Growers also switched acreage as cash-strapped mills delayed or withheld payments for cane supplies, Czarnikow said.
Sugar futures for July delivery rose 0.1 percent to 15.49 cents a pound at 2:44 p.m. in Mumbai in after-hours trading on ICE Futures U.S. in New York. On May 12, the price reached 16.03 cents, the highest since July 2006. Refined, or white, sugar for August delivery in London was little changed at $437.50 a ton.
Vashi Price
Prices on the National Commodity & Derivatives Exchange Ltd. in Mumbai reached a record May 6, while rates at Vashi, India’s biggest market for the commodity, have gained 57 percent in the past year amid forecasts of lower output.
June-delivery futures fell as much as much as 0.4 percent to 2,344 rupees per 100 kilograms. Prices reached 2,430 rupees this month, the highest since trading began in 2004.
Production may rebound to 18 million tons and imports will climb 50 percent to 3 million tons, Bajaj said. Domestic demand will total 22.9 million tons in 2009-10 even as end-of-season stocks halve to 2.5 million tons, the company said.
The stocks-to-use ratio, or stockpiles relative to demand, will decline to 10.9 percent next year from 19.6 percent this season, supporting prices, the company said.
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