Sugar prices likely to remain weak on increased supply

Mumbai, May 29 | Updated: May 30 2007, 05:30am hrs
Sugar spot prices may fall further in the next few days as overall supplies from mills increased and demand from bulk consumers like soft drink units and ice cream makers remained low.

Spot prices of medium grade (M-grade) in Muzaffarnagar (UP) fell significantly by 7% to trade around Rs 1,435-1,440 per quintal on Monday over Rs 1,544 a quintal as on April 1, 2007 on continued increased supplies from mills against steady seasonal demand from bulk consumers. Spot prices in Belgaum (Karnataka) were down 12% to trade at Rs 1,270-1,275 per quintal over past month.

On the NCDEX platform, sugar June 2007 contracts (M-grade) were down 12% to trade Rs 1,310 per quintal on Monday ex-Muzaffarnagar over last month on continued selling pressure by stockists.

Total volume increased to 24,000 tonne on Monday from 17,000 tonne in early-May while total open interest was down to 44,740 tonne on Monday from 70,500 tonne in beginning of the current month.

Spot prices in Vashi APMC market on Tuesday declined by Rs 15-20 a quintal to Rs 1,330-1,400 as inflows increased from mills but local offtake remained low. Overall demand from upcountry like Kolkata and Assam was low. I think prices may remain weak in the next few days, a local trader said. The government announced free sale sugar quota of 13 lakh tonne for the next month which is fair enough to cater the domestic demand, he said.

The government allocated higher free sale quota of 13 lakh tonne for the current month than 12 lakh tonne for April 2007.

Stockists were sellers. Storing sugar would become difficult as moisture will adversely affect the quality due to upcoming monsoon which makes it unattractive for the buyers. Demand from bulk buyers was limited, an analyst said.

The country has so far exported around 7.52 lakh tonne sugar till date. However, the government issued export permits for over 16 lakh tonne. Export demand is limited due to strong rupee value against dollar, a trader said.

Total availability for the current season has been pegged around 30 million tonne including carry over stocks. Closing stocks are expected to be around 8.5 million tonne compared to only 4.5 million tonne last season.