Sugar

Sugar down in north India on poor buys, flat in Maharashtra.

China slashes out-of-quota sugar import permits.

Source says GST to result in dissolution of Sugar Development Fund.

Sugar prices down in major markets on poor demand.

UP sugar mills need to pay Rs.200 cr interest arrears.

ICE sugar drops 4% on ample supplies.

Prices fall 5 rupees in the key wholesale markets of Mumbai and Kolhapur due to weak buying even as mills lowered their prices to trigger demand. Prices of the sweetener in the key spot markets Delhi and Muzaffarnagar were unchanged amid thin trade.

Futures contracts of raw sugar on the ICE were down as China decided to raise taxes on imports from major producers over the next three years. Benchmark July raw sugar contract on the ICE was down 0.6% at $16.29 cents a pound. China tax on imports beyond the first 1.95 million tonne per year will be raised to 95% from the current 50%, effective immediately. The rate fall to 90% after one year and to 85% after two years. The tax on the first 1.95 million tonne will remain at 15%.

The USDA has forecast world sugar inventories in 2017-18 to fall 600,000 tonne to a six-year low of 38.3 million tonne. Despite expectations of a record world sugar production in 2017-18, global sugar stocks are seen falling due to lower inventories in China and Mexico. The department has forecast world sugar output in 2017-18 to rise by 8.8 million tonne to a record 179.6 million tonne, amid expectations of recovery in production of the sweetener in India.

Sugarcane acreage in the country was at 4.19 million hectares as of last week, a shade lower than 4.23 million hectares a year ago. So far, cane acreage is lower on year in most states, but higher in Maharashtra, where the cane output is likely to rebound after a sharp drop last year. Last year, cane acreage in Maharashtra was at 650,000 ha, up 2.7% on year. Sugarcane output in the state had fallen to an eight-year low last season due to drought, while sugar output had dropped to around 4.2 million tonne. Traders expect sugar production in Maharashtra to improve to around 7 million tonne in the new crushing season starting October, taking India’s total sugar output to 24-25 million tonne, sharply higher than year 20 million tonne.

Prices of sugar in global markets are expected to rise in the year ahead due to a likely fall in sugarcane production in Brazil. The company goes with the Brazil sugarcane industry association estimate of cane-crushing at 585 million tonne sugarcane in 2017-18, down 3.7% on year. Strong possibility of El Nino phenomenon in the year and eventual heavy rains would take a hit on cane production. The Centre-South region of Brazil which produces 90% of the country total sugar output produced 35.63 million tonne sugar during 2016-17 (Apr-Mar), up 14.1% on year.

Prices of sugar fell in the key wholesale markets of the country due to sluggish demand from bulk buyers. Medium-grade sugar was in Delhi in Muzaffarnagar, both down 10 rupees. In Mumbai and Kolhapur, prices fell by 10 rupees per 100kg. On NCDEX too, sugar futures were in the red. The benchmark July contract was down 0.2%.

The dual pricing model comprising sale of sugar at 50-60 rupees per kg to industrial consumers and at 30 rupees per kg to household buyers would be a win-win formula for all major stake holders. The mechanism would help cane-growing farmers get remunerative prices for their cane and also lead to a robust balance sheet for sugar millers. Major beverage manufacturers have reduced purchases and replaced sugar with organic sweeteners like stevia. The consumption of sugar in India is growing at 4% on year, and annual consumption is seen touching 30 million tonne by 2020. Of the total sugar consumption in the country, only 30% is consumed by household buyers, while 70% is used by industrial buyers. But none of these industrial bulk consumers reduced the prices of their products when sugar was fetching a low realization.

EID Parry India Ltd has contracted imported 64,000 tonne of raw sugar from Brazil. Company crush about 10% less cane in 2017-18 (Apr-Mar) as availability in Tamil Nadu is lower this year because of drought. In 2016-17, the company had crushed 4.45 million tonne of cane, down from 5.59 million tonne crushed a year ago because of lesser availability. Shares of EID Parry India closed down 2.5% on the National Stock Exchange.

Uttar Pradesh sugar mills owe farmers more than Rs 3,500 crore in arrears for the current crushing season, which has almost rounded off. About 90 per cent of these arrears, or about Rs 3,200 crore, are owed by the state private sugar mills, which number 91 of the total 116 functional units in the state. Against total sugarcane payables of Rs 25,381 crore for 2016-17 season, the mills have paid farmers nearly Rs 21,670 crore, thus leaving the remaining amount of about Rs 3,500 crore still to be settled. Last year, the total payables to UP cane farmers had stood at about Rs 18,000 crore, which have increased to over Rs 25,000 crore, a jump of nearly 40 percent, although the cane price was also higher this season. The state cane price effective for the current season was earlier hiked by Rs 25 from Rs 280/quintal to Rs 305/quintal for normal variety.

Prices of sugar fell in the key wholesale markets of Delhi and Muzaffarnagar, because of poor demand in the market. In Delhi and Muzaffarnagar, the sweetener was sold down by nearly 20 rupees. In Mumbai, the key wholesale market of Maharashtra, prices of sugar were unchanged due to thin trade. Prices in Mumbai, however, are likely to fall in the near term due to lack of demand. On the NCDEX, the most-active June contract of sugar traded down 0.3% from the previous close.

In Delhi, sugar was traded down 20 rupees per 100 kg, as demand waned at higher prices. Prices also fell in the wholesale markets of Kolhapur, as mills scaled down prices to trigger demand. In Muzaffarnagar, another important wholesale market, prices were largely unchanged because trade was subdued. Prices were also unchanged in Mumbai because of subdued demand. Also, as price cuts by mills had failed to trigger demand, these entities weren’t lowering prices further. Demand for the commodity in Mumbai has declined as states that usually buy sugar from Maharashtra have shifted to Uttar Pradesh because of higher production in the northern state. NCDEX May contract was down 0.4%.