The Indian sugar industry will struggle with low sugar prices and large domestic stockpiles in the coming year, according to a report released by United Kingdom-based Czarnikow Sugar Friday.
"There is no question that 2008 will prove to be a difficult year for the Indian sugar industry," said Czarnikow. Earlier this year front-month New York world raw sugar futures dropped to a low of 8.36 cents a pound, down from the historical high of 19.73 cents. Ahead of the US Thanksgiving holiday that contract closed at 9.76 cents. Indian's sugar exports are expected to rise on the year, but stocks will still continue to grow due to a further rise in production, the report said. "This will squeeze industry cash flows and lead to a rise in cane payment arrears," said Czarnikow.
Czarnikow did revise down its forecast for India's 2007-08 output by 1.3 million metric tons (raw value) to 32.5 million tons. However this is still 1.3 million tons higher than last season and remains a record high.
Even though some farmers will switch to other crops such as wheat, corn and rice to trim output, it still take India time to chip away at its excess supplies. Because the bulk of the world's sugar surplus is located in India, Czarnikow expects world sugar prices to be dictated by India's export pace.
[Source: Dow Jones Newswire]
[Source: Dow Jones Newswire]
