Required Report - public distribution

**Date:** 10/12/2006

**GAIN Report Number:** IN6093

IN6093

**India**

**Sugar**

**Semi-Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy, New Delhi

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

Post's forecast MY 2006/07 (October/September) sugar production is
raised to a record 25.1 million metric tons (raw value basis) on
expected higher sugarcane production and lower diversion of cane toward
alternative sweeteners. Consumption is raised to 21.0 million tons and
exports to 2.0 million tons on improved supplies.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Semi-Annual Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[SECTION I -- SITUATION AND OUTLOOK 3](#section-i-situation-and-outlook)

[Production 3](#production)

[Ethanol Program 3](#ethanol-program)

[Consumption 4](#consumption)

[Trade 4](#trade)

[Trade Policy 4](#trade-policy)

[SECTION II: STATISTICAL TABLES 5](#section-ii-statistical-tables)

[Table 1: Commodity, Centrifugal Sugar (raw value basis), PSD
5](#table-1-commodity-centrifugal-sugar-raw-value-basis-psd)

[Table 2: Commodity, Sugarcane, Centrifugal, PSD
6](#table-2-commodity-sugarcane-centrifugal-psd)

[Table 3: Sugarcane Area, Production, and Utilization
7](#table-3-sugarcane-area-production-and-utilization)

[Table 4: Mill Sugar Production by State
8](#table-4-mill-sugar-production-by-state)

[Table 5: Commodity, Centrifugal Sugar, Price Table
9](#table-5-commodity-centrifugal-sugar-price-table)

[Table 6: Commodity, Gur, Price Table
10](#table-6-commodity-gur-price-table)

#   {#section .unnumbered}

# SECTION I -- SITUATION AND OUTLOOK

Note: All data are in raw value basis unless otherwise noted.

## Production

Post's sugarcane production forecast for marketing year 2006/07
(October/September) is revised higher to a record 25.1 million metric
tons (including 500,000 tons of khandsari sugar[^1]) due to an expected
bumper sugarcane crop and lower diversion of cane for production of
alternative sweeteners like Gur[^2]. If realized, this will be more than
13 percent higher than the previous record MY 2002/03 production of 22.1
million tons. Sugarcane production for MY 2006/07 is raised to a record
310 million tons on higher cane area and improved yields due to good
rains and favorable weather, particularly in central and southern India.

The central and southern states of Maharashtra, Gujarat, Karnataka,
Tamil Nadu, Andhra Pradesh and adjoining states have received good
rains. Weather has been generally favorable in northern and eastern
India also. Overall, the MY 2006/07 crop is progressing very well under
adequate moisture conditions, which should support higher yields. Market
sources report a 8-10 percent increase in total sugar production
capacity of the country as several sugar industry groups have expanded
the capacity of their existing units and/or set up new units. Cane
availability to sugar mills is expected to be relatively high as strong
sugar prices during MY 2005/06 will enable mills to make higher and
timely payments during the upcoming season. Gur production, which
competes with sugar for cane use, is expected lower at 4.7 million tons
(vs. 5.0 million tons estimated earlier) due to depressed end-season
prices.

Due to higher than initially expected sugarcane production and lower
end-season diversion of cane for Gur on depressed prices (see Table 6),
MY 2005/06 sugar production has been raised to 21.1 million tons. Based
on the latest official figures available from the Ministry of
Agriculture, MY 2004/05 sugarcane area is lowered and production
estimates for MY 2004/05 and MY 2005/06 are increased.

For information on production policy, please refer the Section III of
the Gain report 'India Sugar Annual 2006 (IN 6029)'.

## Ethanol Program

In April 2006, the Ministry of Petroleum announced plans to supply
ethanol-blended gasoline across the country in the upcoming 2006/07 MY.
Market sources report that petroleum companies have floated tenders for
ethanol, and will finalize prices by the end of October, 2006. The
production of ethanol for blending with gasoline is expected to take off
in November, almost all derived from cane sugar molasses, a by-product
of the sugar industry[^3]. Reports suggest that one of the leading
business houses plans to install three processing units to convert
sugarcane juice to ethanol in the next few years.

For more on India's ethanol program, please refer the Gain report 'India
Bio-Fuels 2006 (IN6047).

## Consumption

Post's consumption forecast for MY 2006/07 is revised higher to 21.1
million tons on improved domestic supplies, and consequent lower prices
compared to previous year. Based on the latest monthly consumption
figures provided by the Indian Sugar Mills Association, MY 2004/05 and
2005/06 consumption estimates have been revised higher to 20.2 and 20.4
million tons, respectively.

Sugar prices during MY 2005/06 were very firm compared to the previous
season (see Table 5), with the prices in May reaching record levels.
Consequently, the government took strong measures to ease prices, such
as invoking the Essentials Commodity Act to control hoarding of sugar by
the trade, banning exports of sugar and allowing sugar imports at zero
duty. Domestic prices in recent months have eased, albeit marginally,
with current prices in the major markets ranging from \$ 400 to \$430
per metric tons.

## Trade

# India emerged as a net sugar exporter in MY 2005/06, and this status is likely to remain in MY 2006/07 on improved domestic supplies. Post has raised its export forecast for MY 2006/07 to 2.0 million tons, as India will be a competitive supplier to neighboring markets. Industry sources expect the government to remove the current ban on sugar exports by end November. 

# 

# Based on the latest shipping data from market sources, MY 2005/06 exports have been revised higher to 1.15 million tons. The strong flare up in international sugar prices in MY 2005/06 led to domestic prices falling below international prices for the first time in several years. There was a strong export push by the trade, which came to a halt after the government imposed a ban on exports in July 2006. Trade sources report that by July 2006, India's MY 2005/06 sugar exports had reached 1.07 million tons (crystal weight basis), with the major importers being Pakistan (600,000 tons), Bangladesh (160,000 tons), Sri Lanka (120,000 tons), Indonesia (60,000 tons), Somalia (42,000 tons), Ethiopia (21,000 tons), and Yemen (20,000 tons) at prices ranging from \$ 450 to \$ 500 per metric ton (FOB). 

## Trade Policy 

Recently the government announced a couple of trade policy measures to
ease domestic sugar prices. On June 23, 2006, the government allowed
imports of sugar at zero duty (against the normal duty of 60 percent).
Subsequently, the government also banned exports of sugar on July 21,
2006. However, these are interim announcements and most likely will be
removed when the domestic sugar supply situation improves, likely by
November. For more information on India's trade policy on sugar, please
refer the Section I of the Gain report 'India Sugar Annual 2006 (IN
6029)'.

###  

# SECTION II: STATISTICAL TABLES

## Table 1: Commodity, Centrifugal Sugar (raw value basis), PSD

+---------------+-------+--------+-------+------+------+------+-----+
| PSD Table     |       |        |       |      |      |      |     |
+---------------+-------+--------+-------+------+------+------+-----+
| Country       | India |        |       |      |      |      |     |
+---------------+-------+--------+-------+------+------+------+-----+
| Commodity     | S     |        |       |      | (    |      |     |
|               | ugar, |        |       |      | 1000 |      |     |
|               | C     |        |       |      | MT)  |      |     |
|               | entri |        |       |      |      |      |     |
|               | fugal |        |       |      |      |      |     |
+---------------+-------+--------+-------+------+------+------+-----+
|               | **2   | R      | **2   | Esti | **20 | Fore | UOM |
|               | 005** | evised | 006** | mate | 07** | cast |     |
+---------------+-------+--------+-------+------+------+------+-----+
|               | USDA  | **     | USDA  | **Po | USDA | **Po |     |
|               |       | Post** |       | st** |      | st** |     |
|               | Off   |        | Off   |      | Offi |      |     |
|               | icial | **Esti | icial | **Es | cial | **Es |     |
|               |       | mate** |       | tima |      | tima |     |
|               | \[    |        | \[    | te** | \[O  | te** |     |
|               | Old\] | **\[N  | Old\] |      | ld\] |      |     |
|               |       | ew\]** |       | **\  |      | **\  |     |
|               |       |        |       | [New |      | [New |     |
|               |       |        |       | \]** |      | \]** |     |
+---------------+-------+--------+-------+------+------+------+-----+
| Market Year   |       | 1      |       | 10/  |      | 10/  | M   |
| Begin         |       | 0/2004 |       | 2005 |      | 2006 | M/Y |
|               |       |        |       |      |      |      | YYY |
+---------------+-------+--------+-------+------+------+------+-----+
| Beginning     | 9070  | 9070   | 5535  | 5165 | 5505 | 4735 | (1  |
| Stocks        |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Beet Sugar    | 0     | 0      | 0     | 0    | 0    | 0    | (1  |
| Production    |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Cane Sugar    | 14170 | 14170  | 20320 | 2    | 2    | 2    | (1  |
| Production    |       |        |       | 1070 | 2325 | 5100 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| TOTAL Sugar   | 14170 | 14170  | 20320 | 2    | 2    | 2    | (1  |
| Production    |       |        |       | 1070 | 2325 | 5100 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Raw Imports   | 2135  | 2135   | 50    | 50   | 0    | 0    | (1  |
|               |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Refined       | 0     | 0      | 0     | 0    | 0    | 0    | (1  |
| Imp.(Raw Val) |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| TOTAL Imports | 2135  | 2135   | 50    | 50   | 0    | 0    | (1  |
|               |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| TOTAL SUPPLY  | 25375 | 25375  | 25905 | 2    | 2    | 2    | (1  |
|               |       |        |       | 6285 | 7830 | 9835 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Raw Exports   | 0     | 0      | 0     | 0    | 0    | 0    | (1  |
|               |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Refined       | 40    | 40     | 600   | 1150 | 1500 | 2000 | (1  |
| Exp.(Raw Val) |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| TOTAL EXPORTS | 40    | 40     | 600   | 1150 | 1500 | 2000 | (1  |
|               |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Human Dom.    | 19800 | 20170  | 19800 | 2    | 2    | 2    | (1  |
| Consumption   |       |        |       | 0400 | 0400 | 1050 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Other         | 0     | 0      | 0     | 0    | 0    | 0    | (1  |
| Disappearance |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Total         | 19800 | 20170  | 19800 | 2    | 2    | 2    | (1  |
| Disappearance |       |        |       | 0400 | 0400 | 1050 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| Ending Stocks | 5535  | 5165   | 5505  | 4735 | 5930 | 6785 | (1  |
|               |       |        |       |      |      |      | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+
| TOTAL         | 25375 | 25375  | 25905 | 2    | 2    | 2    | (1  |
| DISTRIBUTION  |       |        |       | 6285 | 7830 | 9835 | 000 |
|               |       |        |       |      |      |      | MT) |
+---------------+-------+--------+-------+------+------+------+-----+

Note: Stocks include only milled sugar, as all khandsari sugar produced
is consumed within the marketing year. Virtually no centrifugal sugar is
utilized for alcohol, feed, or other non-human consumption.

## Table 2: Commodity, Sugarcane, Centrifugal, PSD

+---------------+--------+--------+------+-----+------+-------+------+
| PSD Table     |        |        |      |     |      |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
| Country       | India  |        |      |     |      |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
| Commodity     | Sugar  |        |      |     | (    |       |      |
|               | Cane   |        |      |     | 1000 |       |      |
|               | for    |        |      |     | HA)( |       |      |
|               | Centr  |        |      |     | 1000 |       |      |
|               | ifugal |        |      |     | MT)  |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
|               | **     | R      | **20 | Es  | **20 | For   | UOM  |
|               | 2005** | evised | 06** | tim | 07** | ecast |      |
|               |        |        |      | ate |      |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
|               | USDA   | **     | USDA | **  | USDA | **P   |      |
|               |        | Post** |      | Pos |      | ost** |      |
|               | Of     |        | Offi | t** | Offi |       |      |
|               | ficial | **Esti | cial |     | cial | **    |      |
|               |        | mate** |      | **E |      | Estim |      |
|               | \      |        | \[O  | sti | \[O  | ate** |      |
|               | [Old\] | **\[N  | ld\] | mat | ld\] |       |      |
|               |        | ew\]** |      | e** |      | *     |      |
|               |        |        |      |     |      | *\[Ne |      |
|               |        |        |      | **  |      | w\]** |      |
|               |        |        |      | \[N |      |       |      |
|               |        |        |      | ew\ |      |       |      |
|               |        |        |      | ]** |      |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
| Market Year   |        | 1      |      | 1   |      | 10    | MM/  |
| Begin         |        | 0/2004 |      | 0/2 |      | /2006 | YYYY |
|               |        |        |      | 005 |      |       |      |
+---------------+--------+--------+------+-----+------+-------+------+
| Area Planted  | 3750   | 3660   | 4150 | 4   | 4400 | 4500  | (    |
|               |        |        |      | 150 |      |       | 1000 |
|               |        |        |      |     |      |       | HA)  |
+---------------+--------+--------+------+-----+------+-------+------+
| Area          | 3750   | 3660   | 4150 | 4   | 4400 | 4500  | (    |
| Harvested     |        |        |      | 150 |      |       | 1000 |
|               |        |        |      |     |      |       | HA)  |
+---------------+--------+--------+------+-----+------+-------+------+
| Production    | 232180 | 237090 | 26   | 278 | 28   | 3     | (    |
|               |        |        | 6880 | 000 | 8000 | 10000 | 1000 |
|               |        |        |      |     |      |       | MT)  |
+---------------+--------+--------+------+-----+------+-------+------+
| TOTAL SUPPLY  | 232180 | 237090 | 26   | 278 | 28   | 3     | (    |
|               |        |        | 6880 | 000 | 8000 | 10000 | 1000 |
|               |        |        |      |     |      |       | MT)  |
+---------------+--------+--------+------+-----+------+-------+------+
| Utilization   | 134270 | 134270 | 18   | 198 | 20   | 2     | (    |
| for Sugar     |        |        | 8500 | 500 | 3000 | 28000 | 1000 |
|               |        |        |      |     |      |       | MT)  |
+---------------+--------+--------+------+-----+------+-------+------+
| Utilizatn for | 97910  | 102820 | 7    | 79  | 8    | 82000 | (    |
| Alcohol       |        |        | 8380 | 500 | 5000 |       | 1000 |
|               |        |        |      |     |      |       | MT)  |
+---------------+--------+--------+------+-----+------+-------+------+
| TOTAL         | 232180 | 237090 | 26   | 278 | 28   | 3     | (    |
| UTILIZATION   |        |        | 6880 | 000 | 8000 | 10000 | 1000 |
|               |        |        |      |     |      |       | MT)  |
+---------------+--------+--------+------+-----+------+-------+------+

Note: Virtually no cane is directly utilized for alcohol. 'Utilization
for alcohol' data in the table refers to cane used for gur, seed, feed
and waste. 'Utilization for sugar' data include cane used to produce
mill sugar and khandsari sugar.

## Table 3: Sugarcane Area, Production, and Utilization

  ------------ -------- --------- -------------- --------- ------------- ------- ---------
  YEAR         AREA/1   YIELD/1   PRODUCTION/1   SUGAR/2   KHANDSARI/3   GUR /3  SEED/3

               Mha      MT/ha     MMT            MMT       MMT           MMT     MMT

                                                                                  

  1985/86      2.86     59.99     171.68         68.98     10.48         71.62   20.60

  1990/91      3.69     65.39     241.05         122.32    13.18         76.63   28.93

  1995/96      4.15     68.02     282.09         174.76    10.00         67.27   30.06

  2000/01      4.32     68.49     295.60         176.65    11.00         72.48   35.47

  2001/02      4.41     67.38     297.21         180.32    10.50         70.73   35.67

  2002/03      4.52     63.58     287.38         194.33    9.50          49.07   34.49

  2003/04      3.94     59.39     233.86         132.51    10.00         63.29   28.06

  2004/05      3.66     64.74     237.09         124.77    9.50          73.82   29.00

  2005/06      4.15     66.99     278.00         190.00    8.50          49.50   30.00

  2006/07(F)   4.50     68.89     310.00         220.00    8.00          47.00   35.00
  ------------ -------- --------- -------------- --------- ------------- ------- ---------

Source: /1: Directorate of Economic and Statistics, Ministry of
Agriculture

/2: Indian Sugar Mills Association

/3: FAS/New Delhi estimate

## 

## Table 4: Mill Sugar Production by State

(In 100,000 metric tons crystal weight basis)

  ---------------------- ------------- ----------- ------------ ----------
  State                  2003/4        2004/5      2005/6       2006/7

                         Final         Final       Revised      Forecast

  Andhra Pradesh         8.9           9.8         12.4         14.0

  Bihar                  2.7           2.5         4.2          4.0

  Gujarat                10.7          8.0         11.7         12.0

  Haryana                5.8           4.0         4.1          4.5

  Karnataka              11.2          10.4        19.2         25.0

  Maharashtra            31.8          22.2        52.0         72.0

  Punjab                 3.9           3.2         3.4          3.5

  Tamil Nadu             9.2           11.1        21.0         22.0

  Uttar Pradesh          45.5          50.4        57.8         66.0

  Others                 5.8           5.3         6.3          7.0

  Total                  135.5         126.9       192.0        230.0
  ---------------------- ------------- ----------- ------------ ----------

Note: Excludes khandsari sugar as state break-out is not available.

Source: /1: MY 2003/04, 2004/05 and 2005/06 - Indian Sugar Mills
Association

/2: MY 2006/07 -- FAS/New Delhi Estimate

## Table 5: Commodity, Centrifugal Sugar, Price Table

(Price in crystal weight basis)

  ------------------- ------------------ -------------------- ------------
  **Prices Table**                                            

  **Country**         India                                   

  **Commodity**       Sugar, Centrifugal                      

  Prices in           rupees             per uom              Tons

                                                              

  Year                2005               2006                 \% Change

  Jan                 18500              20120                9%

  Feb                 18670              20300                9%

  Mar                 18150              19750                9%

  Apr                 18200              20420                12%

  May                 17670              20700                17%

  Jun                 18150              19430                7%

  Jul                 18700              19620                5%

  Aug                 18400              19100                4%

  Sep                 18500              18870                2%

  Oct                 19100                                   -100%

  Nov                 18620                                   -100%

  Dec                 18470                                   -100%

                                                              

  Exchange Rate       45.45              Local Currency/US \$ 

  Date of Quote       10/06/06           MM/DD/YYYY           
  ------------------- ------------------ -------------------- ------------

Source & Contract Term: Indian Sugar Mills Association, Month-end prices
in the Delhi wholesale market.

## Table 6: Commodity, Gur, Price Table

(Price in actual weight basis)

  ------------------ ------------------- ----------------- ---------------
  **Prices Table**                                         

  **Country**        India                                 

  **Commodity**      Non-centrifugal                       
                     Sugar (GUR)                           

  Prices in          rupees              per uom           Tons

                                                           

  Year               2005                2006              \% Change

  Jan                13750               15250             11%

  Feb                13750               14250             4%

  Mar                13020               15250             17%

  Apr                15750               16250             3%

  May                17250               16500             -4%

  Jun                17000               16120             -5%

  Jul                18120               15250             -16%

  Aug                17500               15250             -13%

  Sep                21750               14750             -32%

  Oct                14250                                 -100%

  Nov                14250                                 -100%

  Dec                1550                                  -100%

                                                           

  Exchange Rate      45.45               Local Currency/US 
                                         \$                

  Date of Quote      10/06/06            MM/DD/YYYY        
  ------------------ ------------------- ----------------- ---------------

Source & Contract Term: Indian Sugar Mills Association, Month-end prices
in the Delhi wholesale market.

[^1]: Khandsari sugar -- a low recovery centrifugal sugar prepared by
    open-pan evaporation method.

[^2]: Gur -- a crude non-centrifugal sugar in lump form prepared by
    open-pan evaporation method.

[^3]: India does not produce ethanol directly from sugarcane juice. The
    sugar industry crushes the cane and the cane juice is processed for
    production of sugar with molasses as a by-product. The molasses is
    used for production of ethanol and hydrous alcohol.