Sugar

Maharashtra has extended stock limit on sugar until October. The state government had imposed the stock limit on sugar in May 2016. The government continues to impose the stock limit on sugar due to concerns over supply shortage ahead of the festivals. Wholesalers and retailers in the state will not be allowed to hold more than 500 tonne and 50 tonne of sugar, respectively, for a period of one month after they receive the stocks. The government has also asked sugar mills to advance the crushing of the sugarcane to early- or mid-October to maintain adequate supply of sugar in the market.

The government may consider more duty-free sugar imports and bringing back stock limits on sugar mills this season if prices continue to rise in the run-up to Diwali. The government is looking at the possibility of allowing duty-free imports barely weeks after it increased the import duty on sugar to 50% from 40%, as prices have started rising. Prices in both retail and wholesale markets are expected to rise again as sugar supplies are tight this season and demand is seen increasing ahead of the festival season. The government had last year made it mandatory for mills to offload sugar from their stocks during Sep-Oct to rein in prices. Mills were allowed to keep only 37% of their total stock at the end of September, and 24% by the end of October, forcing them to offload a higher quantum in the market.

Prices of sugar fell for the third straight day in the key wholesale markets of north India due to subdued demand at higher prices amid adequate stocks in the markets. Regular supplies have resumed in the markets now and prices have declined. Prices are subdued also because of reports of the government asking mills to curtail the prices.

Futures contracts of sugar hit their 3% lower circuit, taking cues from the spot markets where prices fell due to low demand at higher prices. The most active December contract was down 3% from the previous close.

Prices of sugar were down in the key wholesale markets of Delhi due to low demand at higher prices. Prices of the sweetener are subdued also because of reports of the government asking mills to curtail the prices. On the NCDEX, the October contract of sugar traded down 0.7% from the previous close.

Futures contracts of raw sugar settled 3.5% lower on the ICE because of expectations of higher global supplies in 2017-18, led by a rise in production in Brazil. Mills in Brazil Centre-South region produced 3.1 million tonne sugar during July 1-15, up 9.1% on year. Reports of early crushing in India due to likely higher production in 2017-18 (Oct-Sep) also weighed on prices. Early crushing would help availability of new stock of sugar in the market. The most-active October contract on ICE ended at 13.9 cents a pound, down 3.5% from the previous close.

Prices of sugar fell in key wholesale markets of the country as bulk demand faded at higher price levels. On the National Commodity and Derivatives Exchange, futures contracts of sugar traded flat because of low volumes.

14 states and Union Territories with a huge sugar consumption base are currently facing supply shortage due to low output last year. The government has asked Indian Sugar Mills Association (ISMA) to ensure that Mills do not increase prices as market prices were quoted at three-month highs. In response to the letter from ministry of consumer affairs to check prices.

National Federation of Cooperative Sugar Factories has asked sugar mills to advance the cane crushing operations for 2017-18 (Oct-Sep) to early or mid-October to maintain adequate supply of sugar in the market. Mills start crushing cane by the end of October or the beginning of November. Demand for the sweetener is expected to rise significantly during major festivals starting from Rakshabandhan on Aug 7 and continuing till Christmas on Dec 25. Early crushing “would help availability of new sugar production to augment stock availability in the market which would help maintain current level of sugar prices. The sugar body had asked mills to offload maximum stocks to help curtail the soaring prices.

The country raw sugar output in the current crop year has already reached 2.485 million metric tons (MMT), 11.03 percent higher than the 2.238 MMT recorded in crop year (CY) 2015-2016. Sugar Regulatory Administration (SRA) showed that the local sugar industry has produced 49.691 million 50-kilogram bags. Sugar production SRA revised target of 2.5 MMT for CY 2016-2017, which end on August 31.

USDA announced that it is opening up the U.S. market to an additional 414,000 tons of foreign sugar. The move was greeted warmly by the by U.S. food and candy makers, who have been clamoring for months for the USDA to allow in more sugar. The U.S. needs more sugar than it produces, but USDA tightly controls imports through a complex TRQ system. USDA each year sets an overall sugar import quota for 40 World Trade Organization countries, not including NAFTA partonneer Mexico. That quota for raw sugar is about 1.2 million tons and currently cannot be raised each year until April 1. The increase announced bring that up to roughly 1.5 million tons for fiscal year 2017, not including the sugar that Mexico is allowed to ship here.

Prices of sugar fell in the key wholesale market of Delhi as demand faded at higher price levels as as supply was disrupted by religious processions on some routes connecting western Uttar Pradesh to the national capital. Medium-grade sugar was sold in Delhi, down 60 rupees from previous close. Prices of sugar in the key spot market of Mumbai, however, were stable at amid thin trade.

Shares of sugar companies were on a high, rallying between 2 per cent and 10 per cent on Thursday after sugar prices on the National Commodity and Derivatives Exchange (NCDEX) got locked in an upper circuit. Centre looks to fix sugar problem in Uttar Pradesh, orders Yogi government to implement Rangarajan formula. After fulminating against errant sugar mills for not paying farmers their dues, the UP government may finally address the real problem of forcing sugar mills to pay too much money to sugarcane farmers. All states, and UP is the guiltiest, fixed a State Administered Price (SAP) that was higher than the FRP, and that was the genesis of increasing farmer arrears. While the UPA had come out with the Rangarajan formula on revenue-sharing between the mills and farmers, states like Maharashtra and Karnataka accepted this, but UP did not. As FE pointed out, over the past five years, UP’s sugarmills paid around Rs 19,000 crore extra to the farmers as compared to a situation where the Rangarajan formula had been adopted. In the season beginning October 2017, the FRP is Rs 255 and the SAP Rs 305—given the current recovery levels of 10.61%, the gap is a much lower Rs 20 per quintal. So, if Yogi Adityanath is able to make the transition quickly, farmers will adapt to the new model—if the sugar cycle changes, as it does from time to time, the sugar mills will not be forced to pay out extra and this will not, once again, lead to the old arrears-agitation-crackdown cycles.

Deficient monsoon rain so far has threatened recovery in sugar production this season, the second year in a row, pushing sugar prices to a three-month high in the past few weeks. 14 states and Union Territories with a huge sugar consumption base are currently facing supply shortage due to low output last year. Despite growing consumption, a number of these states do not produce sugar at all. The government has asked Indian Sugar Mills Association (ISMA) to ensure that Mills do not increase prices as market prices were quoted at three-month highs.

The decision was taken to allow the export under certain conditions to avoid the escalation of prices of sugar in the domestic market. The export of 0.3 million tonnes of sugar in addition to the quantities already allowed for export by the ECC. The Pakistan Sugar Mills Association (PSMA), in May 2017 had informed the government that the sugar industry had produced record quantity of sugar leading to a surplus of 1.475 million metric tonnes which was resulting in the delayed payment to the sugarcane growers. The mill owners are unable to pay the due amount because of the financial crunch faced by the industry and its poor liquidity position. There is a strong need to overview the sugar stock situation and accordingly enhance the export quota. This facilitate the mills to pay farmers outstanding dues and commence the 2017-18 crushing season on time.

China sugar imports plunged in June, after Beijing imposed hefty tariffs on foreign arrivals in late May and slashed imports permits. China bought 140,000 tonnes of raw sugar in June, down 62 percent year on year, and down 25 percent from last month 186,765 tonnes. China has halved the permits for out-of-quota sugar import from last year to around 1 million tonnes. Beijing imposed extra tariffs on out-of-quota imports of the sweetener for the next three years in a ruling in May, following years of lobbying by domestic sugar farmers and crushers. Imports in the first half of this year went up 5.9 percent to 1.41 million tonnes, as lower global prices attracted buyers.