The Hindu Business Line : Sugar prices may rule firm on lower supply

Prices in Mumbai have risen sharply by about Rs 45-50 per quintal in a week's time on restricted supply, speculative buying interest and continued demand.

On Wednesday, prices touched the current year's new high of Rs 1,626 per quintal for medium grade as stockists' bought fearing artificial shortage in the next few days. Sugar prices for small grade (S-30) were quoted at around Rs 1,540/1,587 per quintal.

"The Government may give 15 days' extension to the current month's free sale quota, till July 15, 2004," a leading broker said.

Maharashtra has been allotted 10 per cent lower free sale quota of 4,54,988.80 tonnes this month against 5,05,611.90 tonnes last month. The Government has released national free sale quota of 15 lakh tonnes for the current month against 16 lakh tonnes last month.

"The market sentiment is bullish. For the first time, such announcement (15 days' extension) has been made that will led to artificial shortage. Generally, such announcement comes after 20th of the month," another broker said.

The sugar production is expected to be lower by around 15-20 per cent in the current year at around 170 lakh tonnes and a similar scenario is expected in the next year as well. Demand is expected to continue to grow steadily by 4 per cent to around 190 lakh tonnes.

Sugar carry-over stock as on October 1, 2003 was estimated at 116.14 lakh tonnes. Production till March 2004 for the current season 2003-2004 (October-September) was estimated at 127.28 lakh tonnes. Considering nil imports, total availability for this season is expected to be around 243.42 lakh tonnes.

Total dispatches during the first half of the current season (October-March) were around 84.45 lakh tones, including internal dispatches of 82.15 lakh tonnes and exports of 2.3 lakh tonnes.