India’s sugar market will be oversupplied for a sixth year next season as output in the world’s second- largest producer climbs to a record, according to Czarnikow Group Ltd.

Production in the year starting in October will rise 1% to 28.9 million metric tons, beating the previous all- time high set in the 2006-07 season, the London-based trader and advisory firm said on Tuesday in an e-mailed report. Consumption will trail supply by 2.8 million tons and increase pressure on the government to allow more exports, according to Czarnikow.

India’s Food Minister Ram Vilas Paswan said last month that the country is considering a proposal to export 4 million tons of sugar to trim the nation’s stockpiles. An increase in Indian shipments may have “negative effects” on sugar prices that are trading near a seven-year low, Czarnikow said.

“Given the prospect of another season of domestic surplus, pressure is likely to build on the government to provide further support,” Stephen Geldart, an analysis manager at Czarnikow, said in the report. “We think it is likely the government attempts to subsidize exports once more in 2015-16.”

Sugar’s Slump

Raw sugar prices fell 27% in New York this year, heading for a fifth annual decline in the longest slump since at least 1961. Global inventories expanded by 25 million tons in the past five years as world supply outpaced demand, the International Sugar Organization estimates.

Output in Maharashtra, India’s biggest-producing state, will fall 3.2% to 10.14 million tons in 2015-16, Czarnikow estimates. Millers in Uttar Pradesh, the second largest, will increase production by 500,000 tons to 7.6 million tons. Output in Karnataka will rise 300,000 tons to 5.4 million tons, it said.

“Output is still expanding in two of the three biggest- producing states,” Geldart said by phone from London. “A lot of people are focusing on the poor monsoon, but India could be on course for record output.”

India’s monsoon rains, which are crucial for crop development, were about 23% below normal last month, according to the India Meteorological Department. Changes in the weather could still impact production, William Wallace, an analyst at Czarnikow, said in the statement.

Source:- livemint.com