Sugar

Encouraged by a sharp increase in realisation through last year, jaggery manufacturing units (termed kolhus) say they’re equipped for a price battle with sugar mills on sugarcane purchase. Sugar mills in Uttar Pradesh and Maharashtra, the top two producing states, have announced an early start to crushing this year (the sugar season begins October 1). This was reportedly to get the early variety of cane, normally supplied to kolhus. Jaggery makers traditionally start their operations in September with this early variety, which offers lower yield than the matured type. Crushing of this type of cane, therefore, becomes uneconomical for sugar mills.

India sugar futures gain 1.38% on spot demand.

India govt reallocates 92000 tonnes raw sugar import quota to south mills.

UP sugar mills saddled with Rs.1,130 cr of farmers arrears.

Don’t increase cane prices, U.P. sugar mills appeal to govt.

Europe on the brink of sugar deluge as quotas end.

India’s sugar production will rise to between 28.5 and 30 MMT in 2018/19, said director general of the Indian Sugar Mills Association (ISMA).

Sugar prices moved up in futures market today as speculators built up fresh positions, driven by pick up in demand in the spot market. Fresh positions created by participants on the back of pick up in demand in the physical market amid pause in supplies, mainly influenced sugar prices at futures trade.

The government has reallocated the raw sugar import quota of 92,000 tonnes surrendered by a dozen South Indian mills and the shipments are expected from mid-October onwards. On September 7, the government had allowed import of 3,00,000 tonnes of raw sugar at a concessional 25 per cent import duty to boost supply in southern India. The import quota was allocated to only southern mills. Otherwise, the import duty on sugar is 50 per cent. Around 41 mills showed interest to import. We allocated the raw sugar import quota of 3 lakh tonnes as per the rule. But 11-12 mills surrendered 92,000 tonnes, saying it is not viable. We have reallocated that quantity now . Global prices of sugar are still comfortable to import and some mills have placed orders and shipments will start arriving from mid-October, he said and added that imports have been allowed to those mills/refiners that have their own capacity to convert raw sugar into refined one.

Barely three weeks before the 2017-18 sugarcane crushing gets underway in Uttar Pradesh, the country’s largest sugar producer, the state sugar mills, which are predominantly private sector owned, have arrears to tune of Rs 1,130 crore pertaining to the previous 2016-17 season. Of the outstanding amount, the private millers owe the bulk at almost Rs 945 crore, or 84 per cent of the consolidated arrears. The remaining Rs 185 crore is due from the state co-operative federation units. Settlement of arrears within 14 days of sale was a prominent pre-poll promise of the Bharatiya Janata Party (BJP) government in the run up to the UP 2017 Assembly elections. The 2016-17 crushing season had wrapped up by the first week of May 2017. Although five months have passed, yet the arrears have still not been settled in total.

Sugar mills in Uttar Pradesh have requested the State government not to increase the prices at which sugarcane is purchased from farmers this year. In a letter written to the Chief Secretary of the State, the U.P. Sugar Mills Association (UPSMA) said that any increase in cane prices would hit them hard “as the cane industry has been going through losses for last three consecutive years. The request comes days after distressed farmers of the State alleged that the present rate of Rs. 305 per quintal of cane was much lower than the total input cost that goes into the farming of cane in U.P. Farmers have waged a campaign to increase the State Advised Price (SAP) to ?400 per quintal. Uttar Pradesh became the highest producer of sugar last year, contributing close to 42% of the total sugar production in India.

Europe is about to get a lot sweeter. After a decade of quotas, sugar firms in the European Union can now produce and export as much as they want. Companies such as France’s Tereos and Germany’s Suedzucker AG have been ramping up operations to get ready for the change, which will help fuel a global sugar glut. The scrapping of quotas may also lead to major changes in the global sugar trade. With increased EU production, there will be less need to import supplies from places like Africa and the Caribbean. While the industry has been readying for the change for years, it may further pressure prices that have dropped 28 percent in 2017, the worst performance in a Bloomberg index of 22 commodities. In the EU, the sugar-beet harvest is now in full swing and tests are showing higher-than-average yields in France and Germany, the region’s top growers.

ISMA sees India 2018/19 sugar output at up to 30 MMT.

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.

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.

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.

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.

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.

ICRA bullish on sugar prices in near term as supplies seen tight.