Sugar rush: Ex-mill prices up nearly Rs 150-200 per quintal in a month

Concerns about low output behind the uptick; retail prices may remain flat

Ex-mill sugar prices in the country surged by almost Rs 150-200 per quintal over the past month amid concerns over low output. But, this isn't causing major heartburn for stakeholders. 

For consumers, industry players said, retail prices would remain around Rs 42 per kg for some time now, and in case of any upward movement, the Centre could release additional quotas.

As on Sunday, according to industry estimates, ex-mill sugar prices in Uttar Pradesh were around Rs 3,590-3,710 per quintal; they were Rs 3,320-3360 in Maharashtra, Rs 3,295-3,345 in Karnataka, and Rs 3340-3510 in Gujarat.

Globally, the price of white sugar at the London exchange is around $662 per tonne (Rs 5,090 FOB in India), while raw sugar is around 23.61 cents per pound.

Trade and industry sources said a key reason for the jump in prices is the drawdown in expected sugar production for the 2022-23 season (October-September) from around 36.5 million tonnes (mt) to almost 32.5 mt at present, a fall of almost 11 per cent in just a few months.

In the 2021-22 sugar season, India’s sugar production, according to industry estimates, was around 35.9 mt. Sugar production in 2022-23 could be lower than even last year (this is after accounting for diversion towards ethanol).

A big reason for the drop in production is the extended monsoon in Maharashtra last year which impacted sugarcane crop there this season. Coupled with other factors, sugar recovery in the 2022-23 season until March 31 is around 9.86 per cent, against 10.04 per cent during the same period last year.

“While production is drawing down, demand has risen from bulk consumers, such as confectionary and cola makers, due to the advent of summer and this is leading to a sort of recovery in sugar prices,” Prakash Naiknavare, managing director of National Federation of Cooperative Sugar Factories (NFCSF), told Business Standard.

He said going forward, ex-mill sugar prices would remain firm but that may not have much impact on retail prices because as soon as the rates move above the comfort zone of Rs 42 per kg, the central government will release extra sugar in the market through additional quotas to cool down prices.

The rise in ex-mill sugar prices has pleased a section of the industry that for several months has been demanding a revision of the minimum sale price (MSP) from the existing Rs 31 per kg to at least Rs 33 per kg to bring it at par with the Fair and Remunerative Price (FRP) of sugarcane.

“At present, the average ex-mill sugar prices across the country are over Rs 33 per kg, near the demanded MSP,” another industry player said.

For farmers, the rise in ex-mill sugar prices, along with increased cash flows for the industry through ethanol blending and export of around 6 mt of sugar, means that after many years, sugarcane arrears this year at the end of March 31, was around Rs 5,000 crore. “Of this, Maharashtra has just around a few hundred crores of arrears,” Naiknavare added.