With govt allowing 1 mt exports, global prices fall on expectation of increased supply from India.
The price of sugar hit the upper circuit in futures trading on commodity exchanges to their highest level in 11 months, following the government’s okay to export of a million tonnes.
All sugar contracts reported a three-plus per cent rise in prices on India’s second largest commodity exchange, the National Commodity & Derivatives Exchange.
Total turnover from this segment also shot up 200 per cent, the highest in a year. Sugar for delivery in May gained three per cent to Rs 3,137 a quintal on Wednesday, while profit booking on highs pulled the price down for other contracts. Still, the commodity for delivery in December witnessed a rise of 2.2 per cent.
Total turnover across all sugar contracts shot up to Rs 148 crore on Wednesday, from Rs 49 crore yesterday.
“Although export to the tune of one million tonnes is very low, it is still higher from the market participants’ expectations of 500,000 tonnes in the first tranche. Indian sugar prices are expected to gain further by Rs 150-170 a quintal from the current level on the decision. Crushing (of cane), delayed by almost a month in Uttar Pradesh on the back of cane price disputes, is expected to commence in full swing in the coming weeks. Thus, the sharp gains may be capped in the longer term, owing to sufficient supplies in the domestic markets,” said Naveen Mathur, associate director of Angel Broking.
The sweetener jumped 3.4 per cent to Rs 3,050 a qtl in spot trade at Kolhapur, Maharashtra. Meanwhile, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd, has urged the government to allow an additional million tonnes of sugar exports.
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The worry of extra supply from India has reduced the price globally.
On the New York Mercantile Exchange, the benchmark raw sugar futures traded down 0.6 per cent at 23.29 cents a pound in early morning trade, while Liffe white sugar March futures fell 0.7 per cent to $609.6 a tonne on a free on board (FoB) basis. The price in India, however, was quoted at $630 a tonne for white sugar delivered to a domestic port.
“Also, if global prices decline sharply on supply pressure from India and Thailand, then Indian exports might turn unviable, thus restricting a major upside in prices.
Sugar prices in the Indian markets are expected to trade in the range of Rs 2,900-3,200 a qtl in the coming month. If the government allows further exports, then prices may breach even Rs 3,200 a qtl in the long term,” said Mathur.
The Indian Sugar Mills Association (Isma) has reiterated its demand for allowing the price of sugar in the physical market to be at par with the cost of production.
“We are saying that with the massive hike in cane prices and general increase in other inputs, our cost of production in Uttar Pradesh in 2011-12 is estimated to be Rs 33-34 a kg and Rs 29-30 a kg in Maharashtra. Hence, ex-mill prices should be allowed by the government to stabilise at these levels. Anything less would mean losses to mills and cane price arrears by January 2012 itself,” said Abinash Verma, secretary-gneral of Isma.
In the last sugar season (October 2010- November 2011), the government allowed total export of 2.6 mt of sugar, including unrestricted shipments of 1.5 mt under Open General Licence.
Total sugar output is estimated to remain at 26 mt this year against consumption of 22 mt. With around five mt of carryover stock, the market is expected to remain in heavy oversupply this year.