Sugar production in India may trail demand as early as October next year, spurring the world’s biggest consumer to compete with China for supplies, said ITC Ltd. (ITC), one of the nation’s biggest makers of cookies and candies. “India is likely to become a structural importer” like China, said Somnath Chatterjee, head of procurement at ITC. Domestic prices have slumped in parts of India even as the country resumed exports this year, raising the risk that farmers may be discouraged from planting cane, he said yesterday. Consumption has climbed in China and India as improving incomes lift demand for processed food and drinks. That may extend a rally in sugar futures that have jumped 49 percent in the past year, helping push global food costs to near a record and worsening the lives of the 1.1 billion the World Bank says live on less than $1 a day. “I think the market would probably move into a sustained bull cycle” if India becomes a net importer, said Abah Ofon, an agricultural analyst at Standard Chartered Plc, in a phone interview from Singapore. Sugar for October delivery fell 1.3 percent to 29.12 cents per pound on ICE Futures U.S. in New York yesterday, declining for the first time in three days on signs of increased output in Thailand. Futures gained 4.6 percent this week on concern output may decline in Brazil, the top producer and exporter. Rising Consumption The food industry’s share of sugar demand in India has surged to 70 percent from 50 percent five years ago, Chatterjee said. Demand may increase to 30 million metric tons by 2020 from 23 million tons in 2011-2012, he said. Prices in parts of India have fallen below the cost of production because of the high rates the government requires millers to pay farmers for their cane, said Chatterjee of ITC, which he described as the third-biggest domestic buyer after local units of Coca-Cola Co. (KO) and PepsiCo Inc. The losses may mean millers are unable to pay farmers, causing a decline in planting of the cane that’s crushed to make sugar, he said in a phone interview from Bengaluru. Domestic prices in India, the biggest producer after Brazil, are the second-lowest in the world, Abinash Verma, director general of the Indian Sugar Mills Association, said Aug. 14. A bull-run in the sugar market will only end once an exporter comes up with an additional 8 million tons to boost global trade, said Ofon from Standard Chartered. That’s how much it would take to fill the gap created by the loss of India’s exports and its potential import requirements, he said. Shipments, Prices India shipped a record 5.83 million tons in 2007-2008, according to U.S. Department of Agriculture data, before it became a net importer. The country resumed net exports this year. The nation may boost output to 26 million tons in 2011-2012 from 24.2 million tons a year earlier, leading to a surplus of 4 million tons and creating the potential for “large quantities” to be exported, Verma said Aug. 15. Exports would bolster local prices that have fallen 8 percent this year, said the Cane Committees’ Association, a growers’ group. “The government should allow exports of the entire surplus as our production is exceeding demand and we have comfortable stockpiles,” said Awadhes Mishra, a former president of the Association in the state of Uttar Pradesh. “There is no need to dump sugar in the country unnecessarily as production is also going rise next year.” Supplies may total 29.1 million tons in the year ending Sept. 30 compared with demand of 21.1 million tons, according to the food ministry. The government has allowed exports of 2.6 million tons since Oct. 1, it said. -- Editors: Ovais Subhani, James Poole To contact the reporter on this story: Luzi Ann Javier in Cebu, via the Singapore newsroom at ljavier@bloomberg.net To contact the editor responsible for this story: James Poole in Singapore at jpoole4@bloomberg.net

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