Sugar

Import of Pakistan surplus sugar can help alleviate the prevailing supply crunch if the government allows more overseas purchases of the commodity. Even as the demand is set to rise due to upcoming festivals, India, especially the southern states that have seen sugar production dwindle due to drought conditions, has been hit by a supply crunch. Pakistan is likely to have a surplus of at least 300,000 tonne, which can be easily brought quickly into southern ports. Under the current circumstances, there is availability of 0.5 million tonne surplus sugar in Pakistan, which can come to south India.

The National Federation of Cooperative Sugar Factories Ltd has slammed the government efforts to rein in retail prices by imposing stockholding limits. Sugar industry is the only industry where stock limits are imposed on producers. These controls hurt the health and all-round development of the industry. There was no uniform policy on cane price as, unlike other states, the fair and remunerative price in Gujarat is paid in three installments, while Uttar Pradesh has its own mechanism of state advised price.

Indian Sugar Exim Corp plans to launch a national spot electronic platform for trading in sugar. The platform available to traders, millers, and whoever is interested in buying or selling sugar. Going forward, the platform may integrate with futures and the export-import market. The exchange should provide a transparent platform for spot price discovery.

The government is likely to soon take a decision on import of sugar to augment domestic supplies, as stocks are expected to fall to critically low levels. Government soon take a decision on the need to import sugar, Food Minister Ram Vilas Paswan posted on microblogging site Twitter. The government had taken an in-principle call to allow import of duty-free sugar, and modalities of import would be finalized soon. The government may be looking at another round of duty-free import also because it doesn’t want prices to rise ahead of the festival season.

Prices of sugar were largely unchanged in the key wholesale markets of Delhi, Muzaffarnagar and Mumbai due to lacklustre trade. Sugar prices, however, fell in the key wholesale market of Kolhapur, as implementation of a stock-holding limit on mills dampened the sentiment.

India sugar production in 2017-18 (Oct-Sep) is set to fall short of even the most conservative of government estimates, of 23.5 million tonne, Kolhapur-based Warana Sugar Ltd told in the Sugar Conclave-2017 being held in the city. Warana estimate for sugar output is more than 6% below the lower end of the food ministry projection of 23.5-24.0 million tonne and 12% lower than the Indian Sugar Mills Association estimate of 25.1 million tonne.

The government may extend the stockholding limit on sugar traders for another six months in order to maintain adequate supplies in the market and to keep prices under control. Stockholding limit on traders have to be continued for another six months to prevent hoarding.

The Indian sugar industry is set to witness yet another year of tight supplies despite a 20% rise in output expected in 2017-18 (Oct-Sep), as ending stocks are seen tumbling to multi-year lows. Sugar stocks at the end of October falling to around 1.5 million tonne.

The government has extended the deadline for export of raw sugar to the US under the tariff rate quota by a month to Oct 31. The US allows duty-free import of 8,424 tonne raw sugar from India under the quota every year. Sugar exports from India through the normal channel attract a duty of 20%. There have been no raw sugar exports so far under the preferential tariff quota for 2016-17 (Oct-Sep).

Sugar mills in Uttar Pradesh owed around 18.34 billion rupees to cane farmers as of Tuesday for the season that started Oct 1. So far in 2016-17 (Oct-Sep), mills have paid cane farmers 235.53 billion rupees, out of the total amount of 253.87 billion rupees owed this year. Mills across Uttar Pradesh also owed 3.28 billion rupees as interest on arrears to be paid to sugarcane farmers as of Tuesday. Sugar mills in Uttar Pradesh have collectively paid 99.9% of the total dues worth 206.46 billion rupees for 2014-15, while some private mills are yet to clear arrears of 270.30 million rupees for the year.

Prices of sugar fell in the key wholesale market of Kolhapur, as implementation of a stockholding limit on mills dampened sentiment. As the stock limits are going to come into effect, mills are quoting lower prices to offload their stocks.

Cooperative sector sugar mills across the country have stated that the impact of the stock limit will dampen the cooperative sugar sector. The National Federation of Cooperative Sugar Factories (NFCSF) has expressed concern that the decision to impose stock limits is likely to result in dropping the ex-mill realization below the current levels of Rs 3,650 per quintal in addition to GST and this may adversely affect the timely cane payment to farmers across the country. The food ministry has imposed limits on stocks sugar mills can hold during September and October, in a bid to discourage hoarding and curb any potential price rise during the festival season.

Large sugar mills in Uttar Pradesh have decided to begin crushing in October this year, almost a month ahead of schedule, to boost supply of the sweetener and control shifting of cane supply to jaggery and khandsari units. The commencement of crushing in October is set to benefit the mills, the government, and consumers alike, as it would help control shifting of cane supply to jaggery and khandsari units (kolhus), especially in western UP. In absence of procurement of sugarcane from the mills, small and marginal farmers in UP supply their produce to kolhu to fetch instant cash. With early start, the mills start generating early revenues also.

The government-run National Sugar Institute (NSI) has filed an application for patent rights for its innovative technique to develop bio-detergent from bagasse, the residue left after the extraction of juice from sugar cane. Since no chemical was used in preparing the detergent powder from bagasse, it was safe for skin and environment because it did not discharge any harmful waste. Use of bagasse for detergent has now provided a fresh option of earning.

Prices of sugar fell in the key wholesale markets of Mumbai as implementation of stock-holding limit on mills dampened the sentiment. Sugar stocks in north India are already quite low. Stock limits would ensure slower release by the mills now. The government has imposed stock holding limits on sugar mills for September and October. Sugar mills can hold up to 21% of the total sugar supply of 2016-17 (Oct-Sep) season as of end of September, and 8% of the supply as of end of October.

Mills in Brazil’s Centre-South region produced 3.16 million tonne of sugar in the first fortnight of August, up 6% compared with 2.98 million tonne in the year-ago period. Centre-South Brazil accounts for over 90% of the country’s total sugar output. Mills in the region crushed 45.29 million tonne of cane during Aug 1-15, up 0.3% on year. The Centre-South region also produced 13.52 bln ltr of ethanol during the period, compared with 14.82 bln ltr in the year-ago period. Of the total cane crushed, around 48.7% was used for sugar production, while 51.3% was used to make ethanol. Mills in the region are likely to produce 35.2 million tonne of sugar this season, compared with 35.6 million tonne in 2016-17 (Apr-Mar).

Futures contracts of raw sugar on ICE fell due to higher output of the sweetener in Brazil. The most-active October contract was down 0.6% at 13.74 cents per pound.