Prices of sugar rose in key wholesale markets in the country due to talk that the central government may be more amenable to increasing the minimum support price of sugar, as the government of Uttar Pradesh too, is in favour of the hike. The Uttar Pradesh government had written to the Centre last month, seeking an increase in the minimum selling price of sugar to 32.5 rupees per kg from the current 29 rupees to improve mills. the Uttar Pradesh government was in favour of hiking the minimum support price, the demand for sugar has increased, thereby increasing the sugar prices. There will be more buyers in the market now due to the rise in demand. The medium-grade variety of sugar was sold at 3,150-3,250 rupees per 100 kg in Delhi, up by 10-15 rupees. In Mumbai, prices rose by 20 rupees per 100 kg to 3,182 rupees, while in Muzaffarnagar, prices were up by 30 rupees at 3,280 rupees per 100 kg.

Prices of sugar will remain bullish because the government has restricted sales of the sweetener by mills in the country at 1.85 mln tn to trim supply in the domestic market. the sugar market is sluggish due to thin physical demand and oversupply. The March raw sugar contract on the Intercontinental Exchange slipped below 12 cents a pound for the first time since early October due to thin physical demand, and was at 11.87 cents a pound at 1910 IST, down 0.5% from the previous close. whilst the statisticians keep reducing the overall surplus expected in the new season, there is little appetite in terms of physical demand for the time being. Stocks have increased due to overproduction in the past two seasons and the pipeline seems to be full near term or it may be that end users are happy to let the market come to them.

With global prices trudging lower, and the rupee off the lows it had seen early in the season, India’s sugar mills are finding it increasingly difficult to export sugar. This could start weighing down prices, as the government has said it would not release the buffer subsidy for Jan-Mar for mills that fail to comply with previous orders, including those on mandatory exports and limiting sales to the monthly quota allocated. Sugar mills in the country have started producing ethanol directly from sugarcane juice and from high grade B-heavy molasses to cash in on higher prices offered for these variants by oil marketing companies. Sugar mills usually produce ethanol from C-heavy molasses, which is the slurry left after the extraction of sugar from concentrated cane juice. The government this year announced staggered prices for ethanol to encourage mills to use B-heavy molasses from which sugar has been extracted only once, as well as 100% concentrated cane juice. It had also announced cheaper loans to help mills set up or upgrade ethanol distilleries.