More Stories

Informist, Saturday, Dec. 7, 2024

By Taniva Singha Roy

MUMBAI – Despite a lower sales quota for December, sugar prices plummeted this month and the downtrend is likely to continue in January due to poor demand and higher availability, market participants said. This may prompt the government to allow the export of about 10 million tonnes of sugar this season if production is in line with estimates, they said.

Since November, prices of the sweetener have fallen by around INR 270 per 100 kg to INR 3,500-3,720 per 100 kg in key markets across the country as crushing has started and buying is only need-based, said Naresh Gupta, a trader from north India. The downtrend in prices is likely to continue as there is hardly any demand from bulk consumers such as ice-cream and cold drink manufactures.

Moreover, amid the drop in prices, buyers are hesitant to stock up, Gupta said, adding that in January, prices might either stabilise or improve slightly.

The Centre has set the domestic sugar sales quota for December at 2.2 million tonnes, unchanged from November, but down 8.3% from 2.4 million tonnes a year ago. Though the sales quota for Uttar Pradesh, the largest producer, was cut by nearly 15% to 803,801 tonnes, prices dropped owing to lack of any substantial demand. For Maharashtra, the Centre raised the quota 2% on month to 609,078 tonnes. Here too, prices fell due to sluggish demand.

As of Thursday, ex-mill prices of sugar in the key markets of Uttar Pradesh were around INR 3,580-INR 3,720 per 100 kg, while in the markets of Maharashtra, they were at INR 3,500-INR 3,682 per 100 kg.

Production in the 2024-25 (Oct-Sep) sugar season is estimated at around 33 million tonnes, according to the Indian Sugar and Bio-energy Manufacturers Association. Of this, the government might allow 10 million tonnes to be exported after February, said Semal Sudhir Jain, secretary of the Kolhapur Karad Sangli Sugar Merchants Association.

A more clear trend of production will emerge after Jan. 15, when ISMA releases its production estimates and the National Federation of Cooperative Sugar Factories brings out its figures for crushing. Based on these and other factors, the government will decide if it wants to resume exports, said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

The chances of resuming sugar exports from February are high, said Naresh Gupta.

India imposed a ban on sugar exports in June 2022 amid rising prices and fears of a poor crop. In October 2023, the government extended the ban until further orders, again due to concern about lower production. However, the country allowed the export of sugar on request to certain countries. In 2022-23, India allowed mills to export only 6.2 million tonnes of sugar, after permitting exports of a record 11.1 million tonnes in 2021-22.

The country's gross sugar production in the 2024-25 season is either likely to be on par or a little higher than last year, when it stood at around 33.99 million tonnes, as crop conditions are good and rainfall was above normal this season, Sanjay Khatal, managing director of Maharashtra State Co-Operative Sugar Factories Federation Ltd, told Informist. However, ISMA's preliminary estimate for gross sugar output in the 2024-25 season is 33.31 million tonnes, down 2% from last season.

For exports, the government should give a mill-wise quota or allow a minimum amount of 500,000 tonnes, Khatal said. "India should remain an exporter and not completely step back," he said. According to ISMA, the country is likely to be able to export about 2 million tonnes of the sweetener in the 2024-25 season as domestic stocks are comfortable.

With the 2024-25 opening stock as of Oct 1 estimated at 9.05 million tonnes and gross sugar output in 2024-25 pegged at 33.31 million tonnes, ISMA has projected total availability of the sweetener in the season at 42.35 million tonnes. Considering annual domestic consumption of 29.0 million tonnes, the association has pegged closing stocks in September 2025 at 13.35 million tonnes.

With the buffer stock requirement for a little over two months kept at 5.5 million tonnes, ISMA has projected a surplus stock of 7.85 million tonnes in the 2024-25 sugar season. "The excess stock of sugar will be sufficient to support both the unhindered ethanol blending programme in 2024-25 season and exports in the current season," it said.

Amid the drop in sugar prices, the minimum selling price of sugar stagnant at 31 rupees a kg, and a bright outlook for production, mills could find it difficult to operate if exports aren't allowed, Khatal said. A hike in the minimum selling price would help mills pay workers, vendors, and farmers on time, Khatal said.

While there is no ceiling on the market price of sugar, the government indirectly controls prices by setting a monthly sales quota. As such, the Centre should increase the minimum selling price to help mills, Khatal said.

After meeting domestic demand, sugar mills are likely to divert 4.0-4.5 mln tn sucrose to produce ethanol in the ethanol supply year starting November and with a surplus of 7.85 million tonnes, enough stock will be left to export, traders said.  End

Edited by Avishek Dutta

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.