The domestic sugar stock position is expected to turn surplus in the current season with the sugar output likely to outstrip domestic consumption marginally, leading rating agency ICRA said here.
During sugar year (October-September) 2010-11, sugar output is likely to see a 30-35% growth to around 24-25 million tonne, driven mainly by improved cane acreage in response to healthy cane prices paid in sugar year 2008-09 and SY 2009-10, adequate rainfall and the consequent increase in sugar production.
With domestic consumption at around 23 million tonne and likely exports of around 1.5 million tonne, total surplus will be around 0.5 million tonne in SY 2010-11, a report on the sugar industry by ICRA said.
Notwithstanding the improved crop outlook, there has been a recovery in sugar prices since the steep decline seen during February-August 2010.
Free sugar prices, which declined to around Rs 25,000 per tonne by August 2010 from around Rs 40,000 per tonne in February, firmed up since then and stood at around Rs 28,000-29,000 per tonne in Q2 SY 2010-11.
The recovery was largely driven by an increase in demand during the festive season; a fall in sugar releases during October-November 2010 and a rise in international sugar prices, which improved the sentiments for the domestic sugar industry on the anticipation that sugar mills would be able to export surplus production in SY 2010-11 at remunerative prices.
