Trade with Commodities: Sugar touches sweet spot as sour output looms

Wednesday, May 6, 2009

Sugar touches sweet spot as sour output looms

Rising Global Prices Likely To Make Imports Unviable

INCREASED supply in the domestic market pushed down spot prices of sugar by Rs 15-25 in the first four days of May to Rs 2,519-2,260/qtl from Rs 2,530-2,275/qtl before. Prices surged by almost 6% during the last week of April due to rising global prices of raw and white sugar.
    The current dip in prices is being attributed by commodity experts to speculation over an increased market supply in case the government ask sugar mills to clear their April sugar quota by May 10. Besides, the Indian Sugar Mills Association (Isma) recently revised sugar output estimates upward by 5% to 14.7 million tonnes.
    However, the current price dips could be a temporary blip, since sugar fundamentals are unlikely. Estimates show that this year's sugar output would decline by over 44% from last year's production. It is attributed mainly to lower acreage under sugarcane and over 10% drop in the recovery. The country's output as on April 15 surpassed 13.9 million tonnes, ISMA said. Consumer prices for sugar are also expected to react to arrivals of refined sugar at Indian ports. The Centre recently allowed imports of white sugar up to 1 million tonnes at zero duty but that has yet to reach Indian ports. ISMA's revised estimates fall abysmally behind the 23 million tonnes of annual domestic demand, necessitating heavy imports.
    "Sugar prices are likely to remain firm in the coming days due to supply shortage. Also, rising global sugar prices are making imports unviable," said an analyst at Angel Commodities. Around 1.3 million tonnes of raw sugar have already been contracted for imports, of which only 0.9 million tonnes reached Indian ports.