Ram Gopal Yadav

Sugar futures rise following a 1 MMT sugar delivery against the October contract. Raw sugar for March up 1.9% at 14.36 cents a pound on the ICE Futures U.S. exchange. Bulky deliveries such as this occur when the physical market is uninteresting enough to make the deliverer use the exchange as a last resource.

Government allowed export of 10,000 tn white sugar to the European Union under preferential quota for the new marketing year starting October. Under the quota, the export of sugar to the EU is allowed at zero duty. Sugar exports from India through the normal channel attract a duty of 20%. The government has pegged India’s sugar output in the new season starting October at 24.5-25.0 mln tn, higher than 20.17 mln tn produced a year ago.

India Sugar Mills Association has, in a letter to the commerce ministry, sought inclusion of sugar in bilateral free-trade agreements with neighbouring countries as India would need to export the commodity from 2018-19 (Oct-Sep) onwards on expectations of higher output. The sugar body expects 2018-19 and 2019-20 to be surplus sugar years, as a result of which domestic prices of the sweetener may crash. Low sugar prices may also lead to the problem of higher cane arrears in the country. Commerce ministry had asked for our opinion on how to increase sugar exports as they are framing an agriculture exports policy. The sugar body has suggested the commerce ministry to include sugar in the bilateral free-trade agreement between India and Bangladesh. Bangladesh should also “be convinced to give preferential import duty for India sugar.

Deccan Sugar and Shree Ambika Sugars have surrendered the additional quota to import 11,555 tn of raw sugar allocated to them by the Directorate General of Foreign Trade. The foreign trade body allocated an additional quota of 2,958 tn to Deccan Sugar, and 8,597 tn to Shree Ambika Sugars. Subsequent to the initial allocation of quota for import of sugar on Sep 13, nine applicants had surrendered their allotted quotas amounting to 92,660 tn. The mills surrendered the quota as the quantity allocated to them was very small and thus import would be unviable. Our agreement for the initially allocated quantity has already happened and the shipment is arriving on Oct 7. Deccan Sugar had applied for 25,000 tn raw sugar, while three refining units of Shree Ambika Sugars had requested for a total quota of 135,165 tn raw sugar. The Directorate General of Foreign Trade, however, initially allocated a quota of 5,942 tn raw sugar to Deccan Sugar, and 17,269 tn raw sugar to the refining units of Shree Ambika Sugars.

Prices of sugar are likely to remain firm in the near term due to tight supplies. Output of sugar in 2016-17 (Oct-Sep) fell to a seven-year low of 20.2 mln tn due to continued dry spell in Tamil Nadu, Karnataka and Maharashtra are major sugar-producing states in the country. ICRA has estimated the closing stocks for the season to be at 4.5-5.0 mln tn. The carryover stocks would be sufficient to meet the requirement for only around two months of consumption. This is still lower than the normative stock level of three months (around 6 mln tn). The country ideally needs three months’ worth of carryover stock to meet demand until cane crushing gathers pace by December.

Sugar industry body ISMA is considering transporting excess molasses in the mills of Uttar Pradesh to those in Tamil Nadu, where a drought-hit sugarcane crop is threatening to keep sugar mills and their ancillary units idle and deepen losses. Indian Sugar Mills Association (ISMA) is deliberating on the feasibility of transporting the excess molasses to millers in Tamil Nadu so that it can be processed to make ethanol and other by-products, thereby helping them cut losses.

Prices of sugar fell in the key wholesale markets of north India due to subdued demand and selling pressure on mills to clear stocks before the upcoming crushing season. Expectations of a rise in production this season has also dampened the sentiment for the sweetener and is keeping prices subdued. Mills are quoting lower prices to trigger demand as they have to clear stocks before the crushing season starts at the end of October. In other key wholesale markets of Maharashtra, sugar prices remained unchanged amid thin trade.