* After weak monsoon, unseasonal rain a risk for India sugar
* Cane needs prompt plucking and crushing for better yield
* Harvest delay a worry, but imported raw sugar to help
By Mayank Bhardwaj
NEW DELHI, Sept 3 (Reuters) - After three months praying for rain amid India's worst monsoon in nearly four decades, many cane farmers will now turn to a different idol, hoping for dry weather from late September to help get their harvest to market quickly.
India's cane crop, which started small after years of cheap government purchase prices and withered further this summer by poor rain, faces two more hurdles that could yet trigger another flurry of imports, extending a rally that has doubled sugar prices this year to a 28-year high.
The October harvest needs clear skies from the middle of this month to avoid watering down the sucrose concentration, which could cause a short-term lack of supply as national inventories are expected to dip sharply when the season begins in October.
And the December harvest needs cool, dry weather to deliver a good yield, making winter frost a risk, particular in the northern state of Uttar Pradesh, which often sees frosty winters and occasionally high temperatures.
For global traders, the greatest immediate risk is a repeat of the kind of heavy rains that hit top global producer Brazil in June and July, curbing the pace of the sugar crush to 6 percent below a year ago in the second half of July, although the total cane crush is still likely to reach a record. [ID:nN02530561]
"What has happened to Brazil can happen to India," said
G.S.C. Rao, executive director of leading producer Simbhaoli
Sugars Ltd
Heavy rains can slow delivery to mills as mud paths get water-logged, leading cane quality to deteriorate if it is not quickly harvested after it matures, and sugar recovery to sink if it is not crushed in a mill within a day after it is cut.
BRAZIL-LIKE SITUATION
India, the world's top consumer and the biggest producer after Brazil, has become the focal point for this year's surprise sugar rally after its sudden switch of status from exporter to importer, and as the driest monsoon rains since 1972 further widened its supply deficit, draining inventories.
India has contracted imports of 4 million tonnes so far this year and is expected to buy 4-5 million tonnes in the new 2009/10 season, a Reuters poll found last month. [ID:nDEL483213]
That figure could yet rise if a late crush forces mills to scramble for supplies, with domestic inventories forecast to fall to 2.7 million tonnes by the end of September, enough to cover little over one month of demand amid the peak consumption season.
The low stock would put pressure on supplies, but stocks of imported raw sugar will help mills quickly boost supplies after they begin operations, traders say.
For full coverage of the sugar rally see [ID:nN13225136]
LOW OUTPUT
India's sugar woes have their roots in policy decisions taken years ago, as the government rapidly raised the minimum purchase price for staples such as wheat and rice in order to maintain supplies at home as global prices rose, but failed to raise cane prices until this year, when it was too late.
Many farmers had already switched to wheat and rice, which also offer the advantage of selling to a reliable government rather than haggling over payments with mills.
Sugarcane acreage in Uttar Pradesh, the top producing state that normally accounts for up to half of India's total, shrank nearly 17 percent this year to just 1.78 million hectares as rainfall in the region was 40 percent below average, leaving the crop starved of water at its peak growth phase.
Total national cane sowing fell 3 percent from last year, but planting was expected to be much higher as farmers plant more cane, expecting high prices after a deficit year.
Industry officials said the negative impact of low rains was irreversible, but the crop faces more downside if last year's conditions reappear.
Last year's Uttar Pradesh sugar production dived 44 percent to 4.1 million tonnes as sugar recovery from cane dropped 10 percent, suffering from a combination of unseasonal rain and use of poor-quality pesticides; and in 2006/07 the crop in the state was hit by winter frost, Sudhir Panwar, president of the Kisan Jagriti Manch, a farmers' body, said.
"We remember there was a 25 percent production loss and sugar recovery dropped by 1 percent largely due to frost then," he said.
While recent near-normal rains since mid-August were broadly seen helping yields, analysts warned that anything heavier than light showers beyond Sept. 15 would be damaging.
The weather office has not issued any forecast for rainfall in that period, but the monsoon has not started withdrawing from northern India as it normally does by Sept. 1. Instead, rainfall has intensified in recent days. (Editing by Jonathan Leff)