Sugar Output in Indonesia to Rise 10%, Association Forecasts

Cane production in Indonesia may rise 10 percent after farmers increased planting and raised productivity, potentially helping Southeast Asia’s biggest sugar buyer to reduce imports.

Output may rise to 33 million metric tons in 2010 from 30 million tons last year, according to Colosewoko, a senior adviser at the Indonesian Sugar Association, citing government estimates. Refined-sugar production may rise 6 percent to 2.7 million tons, matching annual consumption, Colosewoko said today, revising an estimate of 2.6 million tons made March 23.

Higher output from Indonesia may help curb a global deficit, estimated at 8 million tons of raw sugar, according to an April 9 report from the International Sugar Organization. Indonesia, which imports mostly from Thailand, has authorized shipments of 500,000 tons of refined sugar this year for public consumption.

“Farmers were keen to plant cane as an increase in international prices was also reflected in the local market,” Colosewoko said in a phone interview. Use of organic fertilizer helped to increase productivity to 76 tons of cane per hectare from 73 tons last year, said Colosewoko, who uses only one name.

Refined-sugar prices more than doubled last year as weather disruptions hurt crops in Brazil and India, the two biggest producers. Refined-sugar futures on London’s Liffe Exchange closed at $496.60 a ton yesterday. The most-active contract peaked in January at $767, the highest level since at least 1989.

‘Delaying the Harvest’

“We are deliberately delaying the harvest to increase cane maturity and reduce excessive water content due to a prolonged rainy season,” Colosewoko said. Still, that wouldn’t lead to a shortage as there were 88,000 tons of the sweetener in storage as of March 31, as well as 446,894 tons of imports by six state- owned companies that should have arrived by April 15, he said.

The delayed harvesting may “raise the extraction rate in the crushing process to 8.2 percent on average this year from 7.3 percent in 2009,” said Colosewoko. That means 1 ton of cane may yield 82 kilograms of sugar. The decision may delay crushing by two to four weeks, with some plants on Java starting production in the second week of May at the earliest, he said.

Retail prices of refined sugar in Indonesia surged 55 percent to average 10,200 rupiah a kilogram ($1,132 a ton) last year, according to data from the Ministry of Trade. The refined price was about 8,400 rupiah a kilogram when the current cane crop was planted in May, and 10,500 rupiah at present.

The planned imports may have been lower than the full 500,000 ton quota due to problems such as a limited availability of vessels and delivery time, said Colosewoko. “It will still be enough to meet demand until new production enters the market in June,” he said.

Six Indonesian state companies completed deals last month for this year’s refined-sugar imports. PT Perkebunan Nusantara XI arranged the final purchase of 28,500 tons of Thai sugar for April delivery at $607 a ton from Kwee Gee Pte, Corporate Secretary Adig Suwandi said March 19.

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Source: Bloomberg