South India's sugar production hit by drought

The Dollar Business Bureau

Even though sugar demand is expected to decline by 3%-4%, prices are likely to firm up due to record low production estimates in the current year. A prolonged drought in the sugar producing regions of Maharashtra, Karnataka and Tamil Nadu; the second, third and fourth largest sugar producing states of India respectively; has caused productivity to take a serious hit.

Indian Sugar Mills Association (ISMA) estimates a 40% - 50% decline in the yield from sugarcane fields during the season ending September 2017.

The state of Maharashtra, which had produced 84.2 lakh tonnes of sugar in the previous season, is estimated to contribute merely 42 lakh tonnes to the nation's sugar output in the current season. This is deemed to be the lowest recorded output for the state in over a decade. Even in Karnataka, the production is likely to fall from 36 lakh tonnes in the previous sugar year to 21.2 lakh tonnes this year.

In Tamil Nadu, the output is likely to fall by more than one-third in comparison to last year. The state is reported to be hit by the worst drought in over a century. Predictions state that Tamil Nadu will produce 6 lakh tonnes in the year 2017-18, as opposed to 10 lakh tonnes in the year 2016-17. This is a sharper fall in comparison with 13.6 lakh tonnes of production in 2015-16.

North India, especially Uttar Pradesh, the largest sugar producing state of India, is all set to benefit from windfall gains in high prices. As opposed to the dire circumstances in the South, UP is estimated to post a 17% growth in production this year.

The grim conditions have forced hundreds of farmers from Southern India to take to protests in New Delhi. Faced by a bad crop last year, farmers have been taking on debt to no avail. The inability to pay back loans has exacerbated the problem of farmer suicides.

Due to lack of sufficient irrigation infrastructure, India relies on the monsoon for 70% of its annual rainfall, especially for crops of cotton, cane, soybean, corn and rice.

According to estimates published by ICRA, India's sugar production shall experience a 19% year on year decline, standing at 20.3 million tonnes during sugar year ending September 2017.

Although monsoons revived in 2016 after two consecutive years of severe drought, most sugar producing regions were not benefactors of a good monsoon last year either.