Sugar seen up at Rs 1900

Depleting stock levels and lucrative export markets may take the sugar prices up to Rs 1,900 per quintal in three months according to a commodity analyst.

"Despite an increase in sugar production this year, the depleting stocks, coupled with good export price would take the prices northwards," said Si Kannan, analyst at Sharekhan Commodities Private Ltd.

The sugar production estimates of agriculture ministry is up 41 per cent at 180 lakh tonne in 2005-06 against 127 lakh tonne previous year.

However, the stock levels would be less at 3.52 million tonne with a sugar usage ratio (Sur) of 17.5 per cent that would scale up prices against the trade body's stock estimate of 4.46 million tonne at an Sur of 22 per cent, he said.

Exporters are also holding back sugar in hope of surge in international prices and this in turn would keep the domestic prices high. The international prices are expected to increase from 14 cents per pound to around 18 cents per pound by next year, he added.

Exports from the European Union, Brazil and Thailand are set to reduce with EU cutting subsidies and more companies over the globe shifting their production to ethanol. The dip in supply is expected to create room for Indian companies in global markets.

However, Kannan added, "Even though lower import duty could increase sugar supply and closing stocks, this might have a negative impact on price."