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ICRA estimated the state’s sugar production to stand at 9.7 million tonnes (mt) in the upcoming season this year. Meanwhile, data compiled by the All India Sugar Trade Association pegged the state’s sugar output at 8.7 mt during 2016-17. This indicates mills in UP would produce 11.5 per cent more sugar in the coming season or nearly four times the state’s own consumption. Domestic production for the full season during 2018 is likely to increase by 18-20 per cent to 24-24.5 mt, driven principally by a recovery in cane availability in Maharashtra and North Karnataka, besides support from monsoons.

When it comes to sugar, the government does not want to take any chances. The food minister tweeted that the government decide on sugar imports soon. That’s a signal for more supply and could be a negative sign for prices.

Stocks of sugar companies in Tamil Nadu are taking a beating on the exchanges — they are close to hitting 52-week lows in the backdrop of an all-time poor performance anticipated in the coming season. Stock prices sliding as the 2016-17 sugar season comes to a close this month. Following an extended dry spell in Tamil Nadu, production has been steadily dropping in recent years and the coming 2017-18 (October to September) season could mark a historic low with capacity utilisation in the vicinity of about 25 per cent, on installed capacity. From a sugar production of 23.79 lakh tonnes in 2011-12, Tamil Nadu’s output has dropped to 10.45 lakh tonnes in 2016-17 and is estimated to hit a low of about 5.7 lakh tonnes in the coming season. This is just about four months’ consumption for the State. Mills elsewhere in UP, Maharashtra and Karnataka are set to benefit from the unfolding scenario.

State-owned Salt Trading Corporation (STC) has imported 25,000 tonnes of sugar from India in a bid to regulate market prices and ensure smooth supply during the upcoming festive season. The shipment amounts to half of the 50,000 tonnes of sugar that STC plans to import by November. The remaining amount will be imported in 10 consignments of 2,500 tonnes each. STC started importing sugar in a bid to end the private sector’s monopoly and make it available at reasonable prices and maintain adequate stocks to forestall possible shortages as output has dropped in both India and Nepal this year.

The government is likely to allow import of 300,000 tonnes of raw sugar at 25-30 per cent import duty. A notification on the matter is likely by Wednesday. Currently, sugar attracts an import duty of 50 per cent, making imports commercially unviable. 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. The imports then were also subject to zonal quantity restrictions. The government had allowed import of 300,000 tonnes duty-free raw sugar in the south zone via Tuticorin, Chennai, Mangaluru, and Kakinada ports, 150,000 tonnes in the west zone via Kandla and Mumbai ports and 50,000 tonnes in the east zone through Haldia and Paradeep ports. The government had later added Visakhapatnam and Gang avaram ports in Andhra Pradesh and Karaikal port in Puducherry to the list of ports where imports were allowed.

Prices of sugar fell in the key wholesale markets of Delhi and Muzaffarnagar due to fear of government allowing import of raw sugar to tide over any shortages. Sugar prices remained unavailable in Maharashtra because markets were shut for Ganpati Visarjan. The government is likely to allow import of 300,000 tonne of raw sugar at 25-30% import duty.

Prices of sugar fell in the key wholesale markets of Delhi and Kolhapur due to sluggish demand from bulk buyers. While demand is already poor, there is selling pressure on mills due to imposition of stock limit. So, they are quoting lower prices.

Global prices of raw sugar are likely to remain high in the long-term due to low availability of the sweetener. Raw sugar futures on the Intercontinental Exchange are now trading below the ethanol parity, directly reducing the availability of sugar. A fall in prices of sugar incentivises millers to shift to ethanol production. Mills in key cane-producing countries like Brazil have a choice between producing sugar or ethanol. The combined effect of sugar trading below the ethanol parity and increased probability of rainfall (in Brazil) would likely cause the sugar mix to swerve in favor of ethanol.