Nazare, September 22

Thousands of acres of India’s sugar crop are suffering severe damage from a faltering monsoon, with some farmers in the world’s second-biggest grower forced to feed withered cane to cattle in Maharashtra, the top producing state.

After a string of bumper harvests created an Indian sugar glut, drought could cut supply in the marketing year starting in October and there is a risk production will drop below consumption for the first time in seven years in the following 2016-17 season.

And even though India is still angling to boost exports in the upcoming season to cut stockpiles, this picture could swiftly turn around with a shortfall in output likely to bolster global sugar prices languishing at seven-year lows.

“The market hasn’t factored in the impact of drought on 2016-17 production,” said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives and Commodities.

Industry officials say thousands of hectares of cane have been damaged after India’s first back-to-back drought in three decades, as farmers also refrain from planting cane for the next season due to water scarcity.

In Maharashtra, a recent Reuters visit showed the impact of the drought.

Farmer Vijay Nazirkar harvests cane shoots daily, but they are so withered he is using them to feed his cattle.

“Sugar mills will not buy this dwarf cane with small shoots,” said Nazirkar as he chopped cane for his 22 cattle, one of his few sources of income as other crops such as corn and onions have also been hit by a prolonged dry spell linked to an El Nino weather event.

So far, he has fed nearly half of his cane crop to cattle in his village of Nazare, about 200 km southeast of Mumbai.

Commodities house Czarnikow puts India’s production next season at 28.9 million tonnes and the Indian Sugar Mills Association at 28 million tonnes.

Although after assessing conditions in Maharashtra and the third-biggest producing state of Karnataka, some industry officials and traders see production falling to 26 million tonnes and even below 25 million tonnes in 2016-17.

That compares with a near record 28.3 million tonnes this year and expectations of annual consumption of 25.2 million tonnes in the upcoming season.

Maharashtra’s output could drop nearly a quarter to eight million tonnes next season and be even lower in 2016-17, said Sanjeev Babar, managing director of Maharashtra State Co-operative Sugar Factories.

After a good start in June, monsoon rainfall weakened in July and August and had badly affected the crop, said Babar.

Rains have been 14 per cent below average so far over the four-month monsoon, but in some areas the rainfall deficit has been as high as 46 per cent.