India's annual sugar production is likely to drop by around 4 percent in the 2013/14 season to around 24 million tonnes as cane yields fell in key producing states due to bad weather, industry and government officials said.
A drop in output, against expectations of production remaining unchanged, would trim exportable surplus from the world's second-biggest producer and support global prices that are hovering near their lowest level in 3-1/2 years.
Lower production could harden local prices of the sweetener and make exports less attractive for mills.
The South Asian country was earlier expected to produce 25 million tonnes of sugar in the year ending on Sept. 30, nearly 2 million tonnes more than annual domestic demand. The drop will halve surplus from this season to 1 million tonnes.
"Per hectare cane yields and recovery rate are lower than industry's expectations. I don't think we can produce more than 24 million tonnes," said a senior official with a leading sugar producer, who declined to be identified.
Sugar mills produced 11.54 million tonnes of the sweetener between Oct. 1 and Jan. 31, nearly 17 percent lower than a year earlier, a producers' body said on Monday, as a dispute over cane price delayed cane crushing.
India had produced 25.1 million tonnes sugar in 2012/13.
"In some areas cane supplies are lower than our estimate. Four factories in the state have already stopped operations. Considering that, we have slashed production estimate by 500,000 tonnes," D.B. Gavit, a director at the Maharashtra Sugar Commissioner's office, told Reuters.
The western state of Maharashtra is the top producer in the country and accounts for nearly a third of the total production.
"Per hectare cane yields are lower. We are conducting a survey to know the extent of the fall," said C. P. Patodia, chairman of the Uttar Pradesh Sugar Mills Association.
Cane yields were lower in Maharashtra due to scarcity of water following a drought in 2012, while in second-biggest sugar producer Uttar Pradesh excessive rains hurt the crop.
"Based on higher area we were expecting 7.7 million tonnes production, but considering yields I think Uttar Pradesh can produce 7 to 7.2 million tonnes," said a senior official with a sugar company that has mills in northern Uttar Pradesh state.
In Uttar Pradesh and Maharashtra a small amount of cane also got diverted for production of jaggery, a coarse traditional sweetener, due to a delay in the start of cane crushing.
India started the 2013/14 year with carry-forward stocks of 8.8 million tonnes, which led to local prices falling in the subsequent months to their lowest levels in 2-1/2 years.
The government is now considering providing incentives for production of raw sugar for exports.
India usually produces white sugar, but its ample supplies have depressed local prices below the cost of production. The government wants mills to produce raw sugar, which can be sold in the world market easily compared to white sugar.
