Weeks after the government?s move to suspend futures trading in sugar till December 2009 mainly to curb speculative activities, the sugar spot prices in the country have continued to rise and witnessed a rally of over 7.5-8% over the past ten days mainly on fundamentals factors.
On May 26, 2009, the Forward Markets Commission (FMC) suspended futures trading in sugar till December and issued an order to all the national exchanges to suspend trading in all the active contracts.
Except Mumbai, spot wholesale prices at the major trading places mainly Delhi, Muzaffarnagar and Kolhapur have crossed Rs 2,500 per quintal over the past two weeks.
Spot prices in Kolhapur market have increased to Rs 2,416 on Friday from Rs 2,247 as on May 27, up by nearly Rs 170 due to continued buying from retailers amid paucity of stocks.
In Delhi, spot prices also shot up by 7.90% to trade at Rs 2,575 per quintal in just ten days while prices at Muzaffarnagar also increased to Rs 2,611 from Rs 2,437 per quintal on May 27, 2009.
?Despite the fact that the government has put ban on futures trading in sugar last week, sugar prices in the physical market have gone up nearly 7-8%. The price rise is mainly because of fundamental factors and government?s policy,? a leading trader said, who did not wish to be named.
?The government?s move to change free sale quota mechanism from weekly to monthly basis and free sale quota extension of May month to mid-June will lead to hoarding of stocks at various stages. Supplies in Haryana and Punjab states have dried up and there are reports of some rakes loaded from Tamil Nadu to northern states,? he said.
Reacting to recent price rise, Mukesh Kuvadia, secretary, Bombay Sugar Merchants Association (BSMA) said, ?Fundamentals currently drives the market mainly on good demand.?
It can be noted that the government has released free sale quota of 16 lakh tonne for May and 14 lakh tonne for June month plus buffer release of two lakh tonne.