Sugar prices dip on supply glut, fears of higher output

After touching a high of Rs 1,865 (spot S30), sugar prices declined about 2 per cent in the Mumbai spot market in the last two days owing to over-production estimates and the Uttar Pradesh government's release of sugar in free market, without any licence.

The spot S30 grade sugar is selling in the range of Rs 1,830-1,840 a quintal. And, while M30 (middle quality) is quoting at Rs 1,870 to Rs 1,900 a quintal, M30 (higher grade) is selling in the Rs 1,900-1,935 a quintal level.

While the prices of mill delivery M30 are quoting at Rs 1,800-1,820 a quintal, S30 is selling in the range of Rs 1,720-1,740 a quintal. Again, while M30 sugar for Naka delivery is priced in the range of Rs 1,865-1,885 a quintal, S30 is quoting at Rs 1,785 to Rs 1,795 a quintal.

"Currently, sugar markets are shy of buyers, literally. The current trend of buyers staying away from the markets will continue at least for the next few days," said Ashok Jain, secretary, Sugar Merchants' Association.

The sugar industry is observing one-day strike on December 15 to mark its opposition to the Model Act passed by the Maharashtra government on Monday. "The Model Act will abolish the importance of APMC," said Rajendra Shah of Hitendra Kumar Thakarshi & Co, a leading sugar trader in the state.

The industry is faced with a supply glut from all the quarters. The khandsari supply is also hitting the demand badly. "The khandsari supply is expected to continue at least for some time, which will bring down sugar prices to a level of Rs 1,650 from Rs 1,715 now.

So, sugar prices are likely to remain range-bound until a miracle like the government's decision to permit 100 per cent ethanol production happens, Shah said.

India is expected to produce about 200 lakh tonne of sugar this year, which is about 25 lakh higher than the consumption level. So, on the supply front, too, the prices would ease out this year, shah added.

The sugar industry is unanimous in its opposition to the service tax, the Model Act and value-added tax being imposed on foodgrains. The industry is also opposing mandatory charges on transportation.