MUMBAI, JULY 25:
Sugar prices have gained ₹1,000 a tonne to ₹35,000 in July on the back of a supply deficit in the market due to export of 1.6 million tonnes (mt) and an 11 per cent decline in domestic sugar production to 25.2 mt in the sugar season ending September.
The Centre has imposed an export duty of 20 per cent to curb exports and improve supply in domestic markets.
Sabyasachi Majumdar, Senior Vice-President, ICRA, said prices would remain firm for three-four quarters given that sugar production is likely to decline further to 23-24 mt in SY2017 (October-September) because of a decline in the availability of cane in Maharashtra and Karnataka.
Although the monsoon is likely to be better during the current year, he said, its impact on output is likely to be seen only in SY2018.
Further, he said, the imposition of 20 per cent export duty is unlikely to have any significant impact on prices and profitability of the sugar mills in the near term as domestic sugar realisations are higher than export realisations.
However, he added, the export duty would dampen prospects of a further rise in sugar prices by discouraging sugar companies contracting more export orders. It also demonstrates the Government’s intent to restrain any price rise, he said.
Meanwhile, sugar for delivery in October on the NCDEX gained 1.15 per cent to ₹3,287 a quintal while the December contract inched up 1.49 per cent to ₹3,890.
ISMA’s projections
Reacting to the futures price rise, Abinash Verma, Director-General of the Indian Sugar Mills Association, said, “There was no new trigger for the market to move up. We will have to wait and see whether the prices will sustain at these levels.”According to the Agriculture Ministry, cane acreage as on July 22 stood at 45.41 lakh hectares (lh), lower than corresponding last year’s 47.40 lh on reduced planting mainly in the key State of Maharashtra. Also other States such as Tamil Nadu, Gujarat and Madhya Pradesh have reported a lower acreage this year. But other producing states such as Uttar Pradesh, Karnataka, Bihar and Andhra Pradesh have reported an increase in area.ISMA has projected that the sugar output for the 2016 season starting October is expected to be 7.33 per cent lower at 232.6 lakh tonnes from 251 lakh tonnes in the previous year.
Global output may drop
In the international market, unfavourable weather conditions have hit sugar production in recent months across major suppliers, leading to expectations of a fall in output.
After almost seven years, sugar prices in the global markets moved up 10 per cent to $530 a tonne in June from $480 recorded in May.
The surge in prices reflects the prospects of a fall in yields in Brazil with heavy rains dampening the harvesting process.
“The global sugar demand-supply situation supports firm prices in the near-term, but going forward, political developments in Brazil, fluctuations in the dollar-real exchange rate, and the size of sugarcane crushing in Brazil, India and Thailand are likely to be the main drivers of global sugar prices,” said Majumdar.
(This article was published on July 25, 2016)
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