Sugar prices across the country have firmed by Rs 300 per quintal in the last fortnight over reports that output could be lower than expected for the 2016-17 season. According to top officials of the Bombay Sugar Merchants Association, the sugar prices for S-grade are in the range of Rs 3,770-3,860 per quintal and M-grade at Rs 3,820-4,050 per quintal.
On December 25, the prices for S-grade were in the range of Rs 3,600-3,750 per quintal and M-grade in the range of Rs 3,650-3,915 per quintal.
As per the Angel Commodities Report on Sugar, the sugar futures closed higher on Monday on reports that the output may be lower than expected in the country. India’s sugar production in 2016-17 is likely to fall to 22 million tonnes, down 4.3% from an earlier estimate, as mills in its key producing state are closing early due to a cane shortage on two years back-to-back droughts.
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However, the government is still hoping that the sugar stock will be sufficient for domestic consumption and so there is no plan to cut import duty. The firm expects sugar prices to trade higher on good physical demand from the industrial buyers and stockists as sugar production in Maharashtra may drop by 40%. There is an anticipation of cane scarcity in Maharashtra and higher sugarcane prices in UP may keep the supply lower at higher prices.
According to Mukesh Kuvediya, secretary general, Bombay Sugar Merchants Association, sugar production was earlier estimated at 235-240 lakh tonnes to now drop down to 225 lakh tonnes. Maharashtar was expected to produce 60 lakh tonnes of sugar and production is now expected to fall to some 45-50 lakh tonnes, he said, adding that the reduction in production and cane shortage has spiked up prices. Moreover in futures trading, the margins of 65% have gone down to barely 25%, which has again led to a rise in sugar prices, he explained.
However, retail prices have marginally gone up by R2-2.50 per kg because traders are now bringing out their old stocks for sale to touch R42-43 per kg, he added. Kuvediya said that exports are not taking off now that there is a 20% duty on exports.
As per reports, the government does not have any immediate plans to cut import duty on sugar as the country would have sufficient supply of the sweetener considering fall in consumption this year and a likely bumper crop next year. The government is also keeping a close watch on sugar futures trading to keep a check on speculative activity and ensure no spike in retail price, which at present is R40/kg. The import duty on sugar at present is 40 % and no overseas purchase is taking place.