Sugar exports to remain firm, prices to be stable: CARE Ratings

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Published: February 21, 2020 12:54:57 AM

In addition to this, unfavourable weather conditions in Thailand and the European Union are expected to affect the sugar output in these regions thus impacting the global sugar production.

An increase in sugar’s Minimum Support Price to Rs 31 per kg a year ago in February 2019 from Rs 29 in June 2018 has supported the stability in sugar prices.An increase in sugar’s Minimum Support Price to Rs 31 per kg a year ago in February 2019 from Rs 29 in June 2018 has supported the stability in sugar prices.

Sugar exports from India are expected to remain firm in the next few months given the upward trend witnessed by international sugar prices in recent months, said a study by Care Ratings.

International sugar prices have increased on a sequential basis in each of the months during October 2019 to January 2020 and continued to inch upwards in February 2020 (data is till February 15, 2020). During February 1 to February 15, 2020, the average international prices were up 16%-22% compared to the prices in October 2019, the Care Ratings study said.

Growth in international sugar prices is on account of lower production of the sweetener in India. In addition to this, unfavourable weather conditions in Thailand and the European Union are expected to affect the sugar output in these regions thus impacting the global sugar production.

All these factors supported growth in international sugar prices. However, the movement in international prices will be influenced by Brazil’s diversion of sugarcane towards production of the sweetener rather than ethanol, given the scenario of rising international sugar prices, the study added.

According to Care Ratings, average wholesale sugar prices have largely remained stable at Rs 34 per kg during the period May 2019 to February 18, 2020, except for the two months July 2019 and September 2019 where the prices averaged at Rs 33 per kg and Rs 35 per kg, respectively. An increase in sugar’s Minimum Support Price to Rs 31 per kg a year ago in February 2019 from Rs 29 in June 2018 has supported the stability in sugar prices.

In addition to this, a decrease in sugar production and expected lower output for the ongoing sugar year 2019-20 have aided the prices to remain steady. The wholesale prices increased 4.9% y-o-y to Rs 33.8 per kg from October 1, 2019, till February 18, 2020. Moreover, sugar exports aimed at reducing inventory is also believed to have supported the prices.

The study further said about 3.2 MT of export contracts have been signed and around 1.6 MT of sugar have been exported against Maximum Admissible Export Quantity (MAEQ). In August 2019, the Cabinet Committee of Economic Affairs announced export subsidy at Rs 10.4 per kg to sugar mills for the sugar season 2019-20. The incentive is to be provided for expenses on marketing costs including handling, upgrading and others, and is applicable to export of up to 6 MT limited to MAEQ allocated to sugar mills for the sugar season 2019-20.

According to the first advance estimates released by Indian Sugar Mills Association (Isma), sugar output is expected to be at 26 MT for the complete SS 2019-20, considering the diversion of B heavy molasses/sugarcane juice to ethanol, a y-o-y decline of 21.5%.

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