Sugar prices hit 2-yr low on higher output estimate

Spot sugar prices today slipped to a two-year low at Rs 1,779.5 a quintal for the M 30 variety and Rs 1,728.50 a quintal for the S 30 category owing to higher estimates of production this season (October-September).

The prices moved southward uninterruptedly giving stockists no chance to see their holdings yielding gains in the long run. They kept rotating their stocks seeing a further price fall on the back of the anticipated higher production this year.

The country's total output this sugar season is estimated at 23 million tonne (mt) against 17.5 mt last year. With carryover stocks of about 5.5 mt, the availability for domestic consumers is expected to touch 28.5 mt, way above the total consumption of 18.5 mt.

A section of the sugar industry estimates the output at 30 mt, which appears a distant dream given the reported lower recoveries in certain parts of the country.

On account of lower recovery owing to an unfavourable monsoon and early harvesting, Maharashtra has already lowered its estimated output this year by one mt.

In early November, the country's second-largest sugar-producing state cut its production estimate by 10 lakh tonne from the 70 lakh tonne projected in September.

For Uttar Pradesh too, lower recovery owing to unseasonal rains and low sunshine in October forced analysts to lower production estimate.

The largest sugar producer's revised output was pegged at 71 lakh tonne, 4 lakh tonne lower than the 75 lakh tonne estimated earlier.

Experts have demanded the opening of export markets. "Opening up of export markets is not going to change on ground level as the entire world is going to face excess production this year. But, the sentiment of traders and exporters will change, which may lift up prices," said Sanjay Tapriya, director, finance & company secretary, Simbhaoli Sugar Mills.

"Associated products including bagasse for power generation and ethanol for fuel are going to play a major role in the upward movement of prices," Tapriya said. The country does not have enough room to increase sugar acreage with a maximum variation of 20 per cent.

The variation in the acreage is unpredictable in north India, which varies from 30 to 100 per cent. Maharashtra has regained the area, going up this season to 9.11 lakh hectare from 6.24 lakh hectare last season.