Lower output may not hit sugar prices

High Inventories Likely To Keep Prices Stable; Sugar Stocks Rally As ISMA Revises Production Figures Downward

DESPITE an estimated fall in sugar production in the year to September 2009, carry-forward stocks and demand elasticity would ensure availability of the sweetener at reasonable prices, according to a senior industry body official.
    "Normally there should be a growth of 4-5% in demand every year. But this could be affected due to demand elasticity," SL Jain, director general, Indian Sugar Mills Association (ISMA), said.
    On Wednesday, stocks on BSE sugar counter rallied between 4% and 20% following a downward revision by ISMA of sugar production estimates to 14.2 million tonnes from 15 mt in the current sugar year (October-September). Sugar production in the current year is expected to be lower by over 45% than the 26.4 mt recorded in the previous year.
    According to Alex Mathews, head of research, Geojit Financial Services, sugar stocks rallied on news that sugar mills would benefit by way of higher realisation following the drop in sugar production. "Stocks surged on short covering and fresh buying," Mr Mathews said.
    However, Mr Jain said that with carry-forward stocks of 8 mt, 22.2 mt of sugar could be available against expected demand of 20.5 million tonne. It was close to 21 million tonne the year-ago period.
    Mr Jain, who is also chief executive of Indian Confectionery Manufacturer's Association, said that confectioners' demand for sugar had dipped following a reduction in offtake of candies which had become more costly.
    Futures contracts on the local commodity bourse also reflected the sentiment on the stock counter. On Wednesday, the April contract on NCDEX platform closed 1% higher from its previous close of Rs 2,189 per 100 kg.
    According to research analyst Lopa Sanghvi from Anand Rathi Commodities, the outlook appears bullish with a target of Rs 2,500-Rs 2,600 by August end. "But with elections round the corner, the government will not let the prices to move very high so this month they could move in a range between Rs 2,100-Rs 2,200," she added.
    nidhi.sharma1@timesgroup.com