Sugar

The government has turned down the request of millers in Tamil Nadu for financial assistance in the form of reimbursement of transportation costs to help them secure raw sugar from other states. Sugar mills in Tamil Nadu are keen on sourcing raw sugar from Uttar Pradesh and Maharashtra, which are expected to produce a surplus in 2017-18 (Oct-Sep), to improve availability of the sweetener in the state. The move would also aid capacity utilization of mills in the state, and reduce their losses. The mills had also urged the government to help cut their loss by restructuring their bank loans.

Decline in sugar and oil prices over the past six months has diminished the hope of financial recovery for a number of Brazilian mills, and could put new deal making in the sector on hold, according to industry experts. Raw sugar prices in New York were hovering around 13 cents per pound, down around 40 per cent since the fourth quarter of 2016, to a level analysts and millers say is close to production costs in Brazil centre-south. The price pressure on sugar and ethanol could cut short a nascent financial recovery for many Brazilian mills during a global sugar supply deficit in 2015 and 2016. It could also slow down talks between millers and potential investors and lead to more closures of indebted firms.

International Sugar Organization has raised its estimate for global sugar surplus in 2017-18 (Oct-Sep) sharply to 4.6 million tonne from 3 million tonne projected in June. The world sugar balance is forecast to show a surplus after two seasons of deficit” as the projected global output of sugar is higher than the consumption. Global sugar body has estimated the world sugar output in 2017-18 at 179.30 million tonne, up nearly 7% on year, led by likely higher production in India, European Union, Thailand and China. Globally, sugar available for export is expected to rise by 1.91 million tonne to 62.15 million tonne led by rising production in exporting countries, while the import demand for the sweetener in 2017-18 is seen at 57.62 million tonne.

Prices of sugar fell in the key wholesale markets of Maharashtra due to sluggish demand from bulk buyers. Mills are quoting lower prices to trigger demand as crushing is expected to start earlier than usual in 2017-18 (Oct-Sep). Sugar mills in Maharashtra have, however, sought compensation of 500 rupees per tonne from the central government for the likely losses they would incur due to lower sugar recovery rate because of early crushing of sugarcane. However, Food Minister Ram Vilas Paswan on Aug 12 said that the government has no plans to allow further imports of sugar yet.

Prices of sugar fell in the key wholesale markets of north India due to sluggish demand from bulk buyers. Mills are quoting lower prices to trigger demand as crushing is expected to start earlier than usual in 2017-18 (Oct-Sep) and so they want to clear their stocks and book profits. Prices of the sweetener remained steady in the key wholesale markets of Maharashtra today amid thin trade.

Sri Lanka raised import tax on sugar by 8 Sri Lankan rupees (3.3 Indian rupees) per kg on Tuesday as prices of the sweetener declined in global markets. Prices of sugar in international markets are currently low due to a rise in output in Brazil, among the world’s largest producers and exporters of the commodity. Mills in Brazil Centre-South region produced 3.41 million tonne sugar in the second fortnight of July, up 9.5% from 3.12 million tonne in the year-ago period, the country sugarcane industry association.

Prices of sugar rose slightly in the key wholesale markets of north India as demand increased at lower price levels. Sugar prices have remained low for many days now, so, we witonneessed some rise in demand at lower prices. Prices of the sweetener were, however, largely unchanged in the key wholesale markets of Maharashtra due to lacklustre trade.

Private sugar mills in Maharashtra have sought compensation of 500 rupees per tonne from the central government for the likely losses they would incur due to lower sugar recovery rate because of early crushing of sugarcane. The Centre has asked millers across the country to begin cane crushing operations for the 2017-18 (Oct-Sep) season early in October, in a bid to tide over likely shortages during the festival season. Mills typically begin crushing cane in November, when the sugar recovery rate is 10-11%, but in October, the recovery rate is lower at 8.5-9.0%. An early start to the season in the month of October would lead to 1.5% to 2% recovery losses to individual mills.

Prices of sugar remained largely unchanged in the key wholesale markets of the country amid thin trade. On the National Commodity and Derivatives Exchange, futures contracts of sugar traded flat because of low volumes.

Sugar mills in drought affected Tamil Nadu have demanded tariff-rate quota (TRQ) import of 6 lakh tonne of raw sugar at zero import duty to help minimize losses. The Indian Sugar Mills Association (ISMA), has been opposing imports, claiming that the country has enough stock of the sweetener. However, South Indian Sugar Mills Association, Tamil Nadu (SISMA-TONNE) has approached the central government, requesting it to allow sugar import. Officials aware of the matter told ET that the government is reviewing the situation and may accept their demand, as it not only helps keep sugar prices in southern India under control but also enable sugar mills clear cane farmers dues.

Prices of sugar were largely unchanged in the key wholesale markets of the country due to lacklustre trade. Thin trade in the market can be attributed to the fear of government action to ensure enough supplies in the domestic market.

Mills in Brazil Centre-South region produced 3.41 million tonne sugar in the second fortonneight of July, up 9.5% from 3.12 million tonne in the year ago period. Centre-South Brazil accounts for over 90% of the country’s total sugar output and mills in the region crushed 50.74 million tonne cane during Jul 16-31, up 2.6% on year. Between Apr 1 and Jul 31, mills have crushed 297.33 million tonne cane, down 4.7% on year. During the same period, they produced 17.57 million tonne sugar, up 3.5% on year. The Centre-South region also produced 11.57 billion ltr of ethanol during the period, compared with 12.88 billion ltr a year ago. Of the total cane crushed, around 48.4% was used for sugar production, while 51.6% was used to make ethanol.

Egypt has contracts to buy 850,000 tonnes of sugar so far, this year, covering the nation needs through January. Egypt typically consumes about 3 million tonnes of sugar a year but produces a little more than 2 million tonnes. The gap is filled by government and private imports, usually purchased between July and October. Egypt state buyer ESIIC is set to hold a purchase tender for 50,000 tonnes of raw sugar for November arrival.

Sugar mills from southern Maharashtra may not be able to start operations before Diwali, even as the industry and government are preparing for advance sugarcane crushing operations by a month to October to tide over any shortages during the festival season. Mills in the region comprising Sangli, Satara and Kolhapur account for the biggest share in sugar production of Maharashtra, the leading producer in the country. Region gets a few spells of heavy rainfall around Dussehra (which falls on September 30), which makes harvesting difficult due to wet fields. The migrating harvesting labour does not start from their villages before Diwali. Thus, mills from Kolhapur will begin crushing only after Diwali (October 19).

Weak conditions were seen at the wholesale sugar market in the national capital during the week with prices falling on persistent supplies from mills amid expectations of a cut in import duty by the government to improve availability in the market to meet festive season demand and curb speculative rise.