Indonesia's white sugar production will rise 17 percent this year, as Southeast Asia's largest sugar consumer targets self-sufficiency by 2014, an industry body said on Monday. Plantation expansions and improving weather conditions will help boost output, with white sugar production seen at 2.7 million tonnes in 2011 versus 2.3 million tonnes last year, Bambang Priyono, secretary at the Indonesian Sugar Council (DGI) told Reuters.
"Sugar production is increasing because of the climate," Priyono said, referring to the more conducive weather. The Council's projection is in line with the Agriculture Ministry, which revised down white sugar production for this year by 31 percent to 2.69 million tonnes from an initial forecast of 3.88 million tonnes.
Prolonged rains in Java island, which supplies 60 percent of Indonesia's sugar output, delayed the domestic crushing season from May to June last year, and reduced the sugar content in cane, resulting in lower production in 2010. Priyono added that Indonesian demand for sugar would hit 4.6 million tonnes this year, little changed from a year ago.
The steady demand comes at a time of rising sugar production in Thailand and India, which is also moving to export half a million tonnes, prompting the two countries to jockey for white sugar buyers in a depressed market. The July raw sugar contract dropped 0.39 cent, or 1.9 percent, to settle at 20.47 cents per lb on Friday, its weakest settlement for the spot contract since August 31, 2010.
Sugar was under the gun from the harvest of Brazil's main centre-south cane crop and a larger-than-expected sugar harvest in major exporter Thailand. Premiums for Thai raw are unchanged at 150 to 170 points against New York's raw sugar futures. Domestic Indonesian output is only used for household demand and home-based industry. Indonesia's government influences prices by issuing import permits for different types of sugar, effectively restricting the inflow of cheaper grades into the country. The archipelago will import 226,000 tonnes of raw sugar from May until the end of 2011 in order to fill idle milling capacity, an Agriculture Ministry official said last month.
Priyono said stock levels in Southeast Asia's largest economy are currently at 852,000 tonnes, versus 353,000 tonnes in January 2010. Indonesia was once the world's second-largest sugar exporter after Cuba in the 1930s. But ageing sugar mills, a vast network of smallholders and an influx of cheaper imported sugar put pressure on local production.
There are ongoing efforts to improve output to try to keep pace with rising demand however, with DGI targeting self-sufficiency within three years. Land used for sugar plantations stands at 452,000 hectares, up from 431,000 hectares last year, Priyono said, adding that with more land set aside for sugar plantations, Indonesia would one day become a net exporter.