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Informist, Friday, Sep 20, 2024

 

By Taniva Singha Roy

 

MUMBAI – Sugar prices have started to pick up in anticipation of firm festival demand, government's boost to the sugar industry and clearer weather, said market participants. Prices fell significantly in the first half of September and gradually bottoming out, they said.

 

Mill prices are currently at 3,650-3,820 rupees per 100 kg, up 80–100 rupees in the domestic markets, as demand improved, after prices fell by about 100 rupees earlier this month, said Naresh Gupta, a trader from north India.

 

However, prices have risen suddenly in anticipation of demand ahead of Navaratri, a nine-day festival honouring the goddess Durga. Prices of the sweetener usually rise ahead of the festival months, Gupta said.

 

Moreover, a reduction in rainfall has also encouraged people to stock up on sugar amid stocks drying up. India received 0.7 mm rainfall today, while northwest India received 0.5 mm rainfall.

 

Sugar prices fell earlier this month as demand for the sweetener was weak in the past few days because resale market participants stayed away from stocking up, due to fear of the sugar getting spoilt during heavy rainfall, said traders. Market participants also attributed this subdued demand to bearish sentiment.

 

Some mills across Uttar Pradesh had kept sugar prices low amid tepid demand. However, these mills raised prices by 100-120 rupees per 100 kg over the last few days as demand is picking up, said Gupta.

 

Sugar prices in central and south Maharashtra rose 10 rupees per 100 kg, as demand improved following a recent fall in prices, said Semal Sudhir Jain, secretary of the Kolhapur-Karad-Sangli Sugar Merchants Association. Prices had fallen by about 90 rupees per 100 kg in the past few days due to poor demand, Jain said.

 

Mills are now awaiting the sales quota for October, depending on which prices will fluctuate, said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

 

In the past few days, sugar prices were on a downtrend despite a lower sales quota, said traders. The government had set a domestic sugar sales quota of 2.35 mln tn in September against expectations of 2.45-2.5 mln tn. Keeping in view firm demand due to a series of festivals in the coming months and seasonal demand, the sales quota was expected to be higher. The quota for September was down 6% on year. In September 2023, the quota was set at 2.5 mln tn.

 

MILLS GET GOVT PUSH

Sweetener prices seem sweeter in the season starting October as the Centre has authorised sugar mills and distilleries to manufacture Rectified Spirit and Extra Neutral Alcohol using sugarcane juice and B-Heavy molasses.

 

The move comes alongside the government's approval on Sep 13 for sugar mills and distilleries to produce ethanol from sugarcane juice, B-Heavy molasses, and C-Heavy molasses for the ethanol supply year 2024-25.  

 

There has been a sentimental effect of such a policy decision, which aided prices, as market players are of the view that there will be lower availability of sugar now, said Semal Sudhir Jain. The short-term outlook seems to be bullish, with a higher diversion of sugar for ethanol and alcohol production, which will mean less production of sugar.

 

LONG-TERM OUTLOOK

With the government rolling back restrictions on the use of sugarcane juice and sugar syrup in ethanol production in the ethanol supply year starting November, there is a possibility that sugar prices will rise.

 

Moreover, if the government hikes the minimum selling price of sugar, prices in the market will be above 40 rupees per 100 kg. The industry has been demanding a raise in the minimum selling price for sugar, arguing that the price has not been revised for the past five years. "MSP (minimum selling price) was last hiked way back, even when the fair and remunerative price (for sugarcane) has gone up by about 30-35%," Informist had earlier reported quoting, Atul Chaturvedi, executive chairman of Shree Renuka Sugars Ltd.

 

Additionally, crushing is likely to be delayed this year in Karnataka, a major sugarcane producing state, said Gupta. Crushing and sugar production usually starts mid-October, but due to heavy rainfall, the Karnataka government has issued an advisory telling stakeholders to start production from the first week of November, he said.

 

However, an excess stock of 2-3 mln tn of sugar has already piled up on the back of restrictive policies. The Indian Sugar Mills & Bio-Energy Manufacturers Association's preliminary estimate of gross sugar output in the 2024-25 season starting October is 33.31 mln tn and sugar production by mills across the country from Oct 1, 2023 to Apr 15 was 31.09 mln tn. There are ample sugar stocks to meet the domestic demand, traders said.

 

In October last year, the government had extended export restrictions on sugar until further notice amid concern over low production in 2023-24. However, ISMA has urged the government to consider allowing export of 2 mln tn of sugar in the ongoing season ending Sep 30 as closing stock is expected to be 9.1 mln tn by then, 3.6 mln tn higher than the normative stock of 5.5 mln tn, according to the Association. Market participants are of the view that if exports are not allowed even after this, it could lead to sweetener prices falling.   End

 

Edited by Aditya Sakorkar

 

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