Downtrend In Sugar May Pause From Next Month

MUMBAI (Commoditiescontrol) - A consistent downtrend in sugar prices may pause from next month as the industry believes that the equations of the market are going to change soon. However, due to oversupply, there is no expectation of a sharp uptrend.

Significantly, despite the demand for Diwali this month, ex-mill sugar prices in Uttar Pradesh have fallen by about Rs 150 per quintal. At present, the mills of the state are selling sugar at around Rs 3,200-3,350/quintal.

Abinash Verma, director general of the Indian Sugar Mills Association (ISMA) says, "In the past months, the price of sugar has gone up considerably due to low quota and high demand for festivals, so there is a slight reduction in prices at this time".

In fact, the government has released a quota of 21 lakh tonnes for this month. Whereas earlier there was a quota of 19.5 lakh tonnes in September and 19 lakh tonnes in August. Abinash says, "The pace of export will also increase from November-December, because by then production in Brazil will stop".

According to sources, there have been export deals of about 1.5 lakh tonnes of sugar in the last 15-20 days, whose delivery is due this year. These deals have been done at the price of Rs 1,850-2,000/quintal. After adding a subsidy of Rs 10.33/kg, its price in the global market is coming at around 11.70-12.6 cents per pound. The government has set an export target of 60 lakh tonnes of sugar for this year.

It is to be noted that the JP Morgan is expecting 64 lakh tonnes of global deficit this year, while ISO and Citigroup have forecast it at 50 lakh tonnes and 72 lakh tonnes, respectively. Against this backdrop, Rabobank expects increase in India's sugar exports.

As far as domestic supply is concerned, sugar production in the country is expected to fall by about 20% from last year to 263 lakh tonnes. Also, there is 142 lakh tonnes of carry-over stock from last year. Out of this, excluding the export of 60 lakh tonnes and domestic consumption of 240 lakh tonnes, more than 105 lakh tonnes of sugar will be oversupplied in the market against the demand.

Delhi-based sugar trader Sudhir Bhalotia believes that exports will arrest a downtrend, but a sharp recovery in prices is unlikely due to oversupply.

Meanwhile, traders are also eyeing cane arrears in Uttar Pradesh. The state government has fixed the deadline for full payment till 31 October. According to the latest data, about 87% of the total dues of sugarcane farmers have been paid.

According to the Uttar Pradesh Sugarcane Development Department, there was a liability of Rs 33,048 crore during the entire season. Out of which 28,718 crore has been paid till October 18, only Rs 4,330 crore is outstanding. Traders are assuming that due to less pressure of dues, there will be no compulsion for mills to sell sugar by reducing prices.