Sugar

The government may allow more sugar imports if required in the country. The Centre had on Sep 7 allowed imports of 300,000 tonne sugar at 25% duty for 60 days to boost domestic supply of the commodity, as stocks are expected to fall to critically low levels. However, Paswan said there is no shortage of sugar seen in domestic markets as of now.

India top sugar producing state Maharashtra begin this year sugarcane crushing season from 1 November. This season Maharashtra estimates a sugarcane yield of 72.2 million tonnes and sugar production of 7.34 million tonnes. The state expects around 170 sugar factories, both in the co-operative and private sectors, to operate in this crushing season.

Sugar millers are now seeking restructuring of loans for a period of 10 years. Heavy rains in the last few days have made it difficult for them to advance the crushing operations. The millers have also sought government guarantee to enable some of the mills to procure loans from banks since several mills are in a bad shape. Several mills in the state owe dues to the tune of Rs 2,600 crore. Nearly 50% of the mills in Maharashtra has the capacity to crush 2,000-2,500 tonne per day. These are making losses to the tune of Rs 10-20 crore. Those with a higher capacity are incurring losses of about Rs 30-40 crore for the season.

Global prices of raw sugar are estimated to fall 24% on year to 13 cents a pound (1 pound = 0.45 kg) in 2017-18 (Oct-Sep) due to higher supplies. Global sugar production is expected to increase 7% on year to a record 190 million tonne, slightly higher than the forecast in June. The output in Brazil, the world’s largest producer, is seen increasing 1% to 40 million tonne in 2017-18, and 47% of the cane crushed is expected to be allocated for sugar production, up from 46% in 2016-17. Sugar production in India is expected to be around 27 million tonne in 2017-18, up 11% on year. Global sugar stocks are seen up 7% at 76 million tonne in 2017-18, as production is seen increasing faster than consumption.

Sugar production in Brazil key Centre South region drop to a three-year low next season as a dearth of replanting takes its toll on cane yields, and with ethanol raising its take of the harvest. Kingsman pegged sugar output in the Centre South, which is responsible for more than 90% of output in the top producing country, at 33.99m tonnes for 2018-19, on an April-to-March basis. Sugar output at that level would represent a fall of 2.1m tonnes year on year, and would be the lowest since the 31.22m tonnes produced in 2015-16. The decline would represent a double whammy of a lower cane crush, seen dropping to a four-year low of 575.0m tonnes, and a lower proportion of cane being processed into sugar rather than ethanol.

Prices of sugar rose in markets in northern India because demand improved at lower prices. Lower offerings from mills also supported prices of the commodity. In Maharashtra, however, prices were remained unchanged amid thin sales.

October raw sugar settled down 0.55 cent, or 3.8 percent, at 14.37 cents per lb, after falling to a two-week low of 13.72. Sell stops were triggered as raw sugar futures crossed below the 40-day moving average at 14.65 cents per lb. Expectations of rain arriving in top-producer Brazil after recent dry weather pressured the market. December white sugar settled down $11.90, or 3.2 percent, at $365.00 per tonne.

Prices of sugar rose in the key wholesale markets of north India as demand increased at lower price levels. Sugar prices have remained low for many days now, so, we witonneessed some rise in demand at lower prices. Prices of the commodity have been falling since the beginning of September on account of increased selling pressure on mills as the government imposed stock limits on them. Prices of the sweetener were, however, largely unchanged in the key wholesale markets of Maharashtra in a lacklustre trade.

Davangere Sugar Co Ltd has surrendered the quota allocated to it by the Directorate General of Foreign Trade for import of raw sugar. The company, which has a refining capacity of 500 tonne per day, had applied for 20,000 tonne raw sugar import. The Directorate General of Foreign Trade, however, allocated 6,190 tonne raw sugar to the company. Davangere (Sugar) had opted out of the quota on Sep 14, and licence has not been issued to it. If an applicant fails to bring in sugar after obtaining a licence, they would have to pay a penalty of 0.5% of the value of the unutilised quota.

With Tamil Nadu facing a shortfall in sugar production in 2017-18 (October-September), local markets are witnessing the arrival of stocks from Karnataka and Maharashtra. Mills in Tamil Nadu will process about 1.40-lakh tonnes of the imported raw sugar, Karnataka 1.10-lakh tonnes, Andhra Pradesh 34,000 tonnes, and Maharashtra 5,900 tonnes. Tamil Nadu mills have welcomed the move to import raw sugar, as it adds a bit to the capacity utilization and revenue in the coming season. The shortage of cane in Tamil Nadu, due to the extended dry spell in recent years, means mills will be working at less than 30 per cent of capacity. The imported raw sugar represents a small addition, about 12-15 days of processing capacity. Given the present pricing, with sugar selling at about 38 rs a kg, mills estimate they will be able to turn a profit of about ₹1-1.50 a kg on the processed raw sugar.

Prices of sugar fell in key wholesale markets of the country amid increased selling pressure on mills. Prices of medium-grade sugar were down by 5 rupees per 100 kg each in the markets of Delhi and Muzaffar nagar, while they were 10 rupees per 100 kg lower in Mumbai and Kolhapur. Millers quoted lower prices as there was no demand at current price levels and mills have to adhere to stock limits.

Sugarcane crop in South and Central Maharashtra, the key growing regions, has suffered extensive damage due to pest attacks, and yields could dip by 10-15 per cent in the twin regions, causing extensive loss to farmers. Crop damage is extensive because of the white grub pest, which attacks the roots of sugarcane. In South and Central Maharashtra, more than 16.85 per cent and 41.25 per cent area has been affected in 2016-17 due to the pest attack. An average 30 to 35 per cent area is affected, which could result in a 10 to 15 per cent loss in sugarcane yield. In Maharashtra, sugarcane has been planted in about 9.5-lakh hectares for the 2016-17 season, higher than the 6.33-lakh hectares in the previous year.

Pakistan has allowed export of 500,000 tonne of sugar due to surplus stock in the country. Pakistan is estimated to have produced around 6.2 million tonne sugar this season. The country’s consumption is roughly 5 million tonne, leaving a surplus of 1.2 million tonne. For the 2016-17 marketing year ending September, the country has allowed export of 725,000 tonne of sugar till July, though exports have been below the allocated quota due to low prices globally.

After two years of deficit, the global sugar market is likely to post a surplus in 2017-18 (Oct-Sep). The surplus expected had dragged front-month raw sugar contract on Intercontinental Exchange to a 16-month low of 12.53 cents a pound in June. Though prices have since recovered to over 14 cents, they are likely to trade in a narrow range of 12.55-18.20 cents a pound over the next few months. Sugar prices are likely to remain in a range as the global sugar production is seen at a record high this year. International Sugar Organization has pegged global 2017-18 sugar output at a record high of 179.30 million tonne, up 11.5 million tonne from this year, driven largely by production increases in India, Thailand, China and EU. Sugar output in Brazil, the world’s largest sugar producer and exporter, is expected to be only marginally higher at 36.2 million tonne, while that in European Union it may rise to 18.64 million tonne, much higher compared to 15.9 million tonne produced in 2016-17.

Shree Renuka Sugars Ltd has been allowed to import 60,658 tonne or 20.2% of raw sugar under the quota to import at a concessional rate by the Directorate General of Foreign Trade. EID Parry India Ltd has been allocated 46,556 tonne or 15.5% of the total quota. The government took into account monthly refining capacity of mills, quantity applied, and the number of applications while considering the applications for raw sugar import.

Prices of sugar continued to fall in the key wholesale markets of north India on account of sluggish demand from bulk buyers. Demand for the sweetener has been poor since the beginning of September. There is no demand at all. Production in Uttar Pradesh is also seen higher, so no one can stop prices from falling further. In the key wholesale markets of Maharashtra, however, prices remained largely unchanged due to lacklustre trade. Traders have a bearish view on sugar prices for the short as well as the long term.

October raw sugar settled down 0.06 cent, or 0.4 percent, at 14.27 cents per lb. Some commercial longs are rolling their positions into the March contract. There probably some March and May price fixing going on, too. The premium for white over raw sugar – a measure of the profitability of refining – has recovered only slightly after falling to its weakest in 2-1/2 years this week in the run-up to an expected large harvest in the EU. ICE October white sugar was up $5.70, or 1.5 percent, at $374.70 a tonne.