Sugar prices seen slipping on weak demand, quota

Domestic sugar spot and futures prices are seen falling during the week owing to low demand and the announcement of an additional open market sugar sale quota, traders and analysts said on Monday.

The market is also rife with speculation that the quota for the current month may be further raised, they said.

Spot prices are seen falling over the week as millers and stockists try and sell off the sugar quota for the month.

"Prices are likely to be depressed as the government has announced an additional quota of 100,000 tonne for sale in August," said a Mumbai-based trader.

"The additional quota has turned the market sentiment bearish." he added.On July 29, the government had announced a quota of 1.1 million tonne. On August 3, the monthly quota was raised by 100,000 tonne.

In India, the government decides the quantum of sugar mills can sell every month. The open market sale quota for July was fixed at 1.1 million tonne.

According to traders, the demand has also tapered off with the onset of heavy rains. Sugar storage becomes difficult during rains-thus denting the demand.

Fresh arrivals are also seen pulling down prices, traders said.After the let-up in the rains that lashed Maharashtra late last month, the transportation woes have also eased.

Around 700 tonne of sugar arrived in the Vashi market today.

"The transport freight rates have come down and this has also pulled down prices," said Mukesh Kuvadia, joint secretary, Bombay Sugar Mills Association.

Freight charges were Rs 80-85 per 100 kg when the rains lashed Maharashtra. It has now come down to Rs 65 Kuvadia said.Sugar futures are also seen trading lower on weak demand, traders said.

"Volumes traded on the exchanges are low and this is pulling down prices. The trend could continue for some days as the demand is weak," said Jigar Pandit, a trader with Sharekhan Commodities, a Mumbai-based brokerage.

Market is also rife with talk that the government may release additional quota of around 0.2 million tonne. This speculation is also pulling down prices, an analyst with a Mumbai-based brokerage.

Analysts see M-grade August sugar contract on the National Commodities and Derivatives Exchange finding support at Rs 50 per 100 kg.