BANGKOK, Oct 5 (Reuters) - Thailand's cane sugar output for 2016/2017 crop year is expected to fall 3.2 percent because of a widespread drought which will pull refined sugar output lower as well, a government agency said on Wednesday.
Thailand, the world's second-largest sugar exporter, experienced its worst drought in more than two decades earlier this year because of the El Nino weather pattern, causing crops to die. The El Nino weather phenomenon brings scorching heat across Southeast Asia and impacts crop yields.
Thailand expects to reap 91 million tonnes of cane in 2016/17, down from 94.05 million tonnes in 2015/16, said Somsak Jantararoungtong, secretary-general of the Office of the Cane and Sugar Board.
"That should translate to around 9.3 to 9.4 million tonnes of refined sugar next year, compared to this year's 9.6 to 9.7 million tonnes," said Somsak.
Dry weather conditions can make cane less sweet, meaning mills need more to produce the same amount of sugar.
Thailand's cane output has been dropping since the country harvested 105.96 million tonnes in 2014/15.
Despite the slide in output, the Thai sugar industry said it remained confident the industry can weather the impact.
"The lower output won't affect trade," said Sirivuthi Siamphakdee, chairman of the public relations team of the Thai Sugar Millers Corporation Limited, which represents three sugar millers associations.
In March, Thailand slashed its forecast for 2016 sugar exports to 7.1 million tonnes from an earlier estimate of 11 million tonnes.
Stockpiles in India, the world's biggest exporter of the sweetener, will fall to 23.3 million tonnes next year, the lowest in over a decade, as consumption outstrips supply, the Indian Sugar Mills Association said in July.
A drop in output levels from Thailand and India has contributed to forecasts for a widening global supply deficit this year, fuelling a rally in international prices to a four-year high.
Somsak said more relaxed regulations as part of the Thai government's drive to support the sugar industry has prompted sugar millers to request licenses for new mills and mill expansion.
"The sugar price outlook in the next five years encourages farmers to grow cane," he said. "So far this year the board has issued approvals for 22 new plants and 17 mill expansions."
Millers have five years to complete construction of their mills before their licenses expire, he added.
There are currently 54 sugar mills in Thailand. (Writing by Patpicha Tanakasempipat; Editing by Amy Sawitta Lefevre and Christian Schmollinger)