Sugar

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.

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.

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.

Karnataka, where sugar output fell to an eight-year low of 2.05 million tonne this marketing year, have to wait long to return to its normal production level of about 5 million tonne. While production of sugar is seen rising in the southern state in 2017-18 (Oct-Sep), the rise would be marginal. Sugar output in the state during 2017-18 is seen rising to around 2.4 million tonne helped by “good” monsoon rains this year following two successive years of drought.

Prices of sugar rose in the key wholesale markets of Mumbai due to an increase in demand as Maharashtra markets opened after a three-day holiday. Prices of the sweetener, however, fell in the key wholesale markets of Delhi as demand was hit due to police blockades set up in Punjab and Haryana to quell unrest ahead of the announcement of the sentence against self-styled godman Gurmeet Ram Rahim.

The domestic demand for sugar may rise to about 30 million tonne by 2020, up from an estimated consumption of 24.5 million tonne this year. In order to meet the demand of 30 million tonne, the country should record a growth of 3.75% per year in the production of the sweetener.

Prices of sugar fell in the key wholesale markets of the country due to increased selling pressure on mills. Prices of the commodity have declined due to increased selling pressure on mills as the government has imposed stockholding limits on them. The government has imposed stockholding limits on sugar mills for September and October to keep prices in check ahead of major festivals.

The Directorate General of Foreign Trade has reallocated quota for the import of 92,660 tonne raw sugar at 25% duty. Subsequent to the allocation of quota for import of sugar on Sep 13, nine applicants had surrendered their allocated quota. Some sugar mills surrendered their quota as the quantity allocated to them was very low and imports would have be unviable. The Directorate General of Foreign Trade had received a total of 35 applications for import of raw sugar, much higher than anticipated.

Futures contracts of sugar 11 fell to a one-month low of 13.11 cents a pound on the ICE due to a higher-than-expected rise in the output of sugar in the Centre-South region of Brazil. The October contract of sugar 11 ended at 13.21 cents a pound, down 3.9%, while the most active March futures closed 3.1% lower at 13.91 cents a pound.

Mills in Brazil’s Centre-South region produced 3.13 million tonne of sugar in the first fortnight of September, up 29.2% from 2.42 million tonne produced a year ago. Centre-South Brazil accounts for over 90% of the country’s total sugar output. Mills in the region crushed 45.44 million tonne of cane during Sep 1-15, up 20% on year. During Apr 1-Sep 15, mills crushed 427 million tonne of cane, down 1.6% on year. During the same period, mills produced 26.39 million tonne sugar, up 5.9% on year. Of the total cane crushed, around 48.4% was used for sugar production, while 51.6% was used to make ethanol. Mills in the region are likely to produce 35.2 million tonne of sugar this season, marginally lower than 35.6 million tonne produced in 2016-17 (Apr-Mar).

Owing to a sugar shortage in the country, the government had planned to start the crushing of sugarcane ahead of the normal schedule- before Diwali (October 19)- but the delay in the monsoon’s retreat has put paid to this plan. According to the sugar industry, heavy rains are again expected in October in Karnataka and Maharashtra- states where the cane crushing starts first- due to the lingering monsoon. It means labourers cannot access the cane fields as they will be muddy during this period. The National Federation of Cooperative Sugar Factories (NFCSF) has said that the crushing could start from November. There is heavy rain in Karnataka and Maharashtra. Its occurrence in October also will make it impossible for labourers to go into the fields. Due to this, the crushing work is expected to start only in November. However, in case the monsoon recedes completely by mid-October, crushing might start in Karnataka after Diwali. Due to the delay in the monsoon’s retreat, Maharashtra has decided to postpone the cane crushing to November 1.

Sugarcane price fixation sparks row between farmers, millers in Uttar Pradesh.

The prices of sugar fell in the key wholesale markets of the country on Thursday amid increased selling pressure on mills. Prices of medium-grade sugar down rs 5 in the markets of Delhi and Muzaffarnagar, and rs 10 per 100 kg lower in Mumbai and Kolhapur. Millers are quoting lower prices as there is no demand at current price levels despite it being the festival season. Mills also have to adhere to stock limits. The government has imposed stock holding limits on sugar mills for September and October to keep prices in check ahead of major festivals. Sugar mills can hold up to 21 per cent of the total sugar supply of the 201617(October-September) season as of the end of September, and 8 per cent of the supply as of the end of October. Demand for the sweetener has been low since the beginning of the month. Some sugar mills in western Uttar Pradesh are likely to begin cane crushing for 201718 (October-September) on October 10.

Sugar Prices fall on rain forecast for Brazil.