Sugar, molasses prices up on production concerns

The output estimate has been lowered by 6 million tonnes.

Lower sugar output projections are driving up prices of sugar and molasses at a time when the crushing of sugarcane is in full swing across the country.

While the sugar price has moved up by 7 per cent since the crushing began in November-end, molasses has gained over 15 per cent in the same period.

Sugar industry associations are now making a projection of 26 million tonnes output for the 2007-08 season (October-September), 6 million tonnes less that their initial estimate of 32 million tonnes and 2 million tonnes less than the previous year's production of about 28 million tonnes.

"The anticipated shortfall in sugarcane crushing is leading to a firmness in the price of molasses," said Tarun Sawhney, vice president, Triveni Engineering and Industries.

Ex-factory sugar prices in Uttar Pradesh (UP), that were ruling at Rs 1,375 a quintal when the mills began crushing, are now quoted at Rs 1,480.

Molasses, that was selling at Rs 190 a quintal in November, has gone up to Rs 220-230 a quintal. Usually, prices of both these commodities decline after mills start crushing every year in October.

"We estimate this year's production to remain around 26 million tonnes since crushing was delayed in UP and Maharashtra, the two leading sugar producing states. Initial harvest reports from these states point to a lower sugarcane yield as well," said Vinay Kumar, managing director, National Federation of Cooperative Sugar Factories.

Crushing was delayed in UP by about a month due to the unwillingness of sugar mills to buy at state advised price (SAP) of Rs 125-130 a quintal.

The mills started crushing only after the state High Court announced an interim sugarcane price of Rs 110 a quintal. In Maharashtra, the prolonged monsoon prevented harvesting of sugarcane leading to delayed crushing.

The country's sugar output by January-end is expected to be around 10.5 million tonnes as against 12.3 million tonnes produced by January last year.

However, some industry experts say these projections may go wrong by the time the season ends as the country ended up producing 28 million tonnes last year against the initial estimate of 23 million tonnes.