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Suresh P. Iyengar

Domestic prices expected to go up from June

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Mumbai March 2 Taking a cue from futures prices on the New York Board of Trade (NYBOT), sugar company stocks on the BSE, which were hovering near their 52-week low, staged comeback even as the market remained bearish through the week.

On Thursday, sugar for May delivery on NYBOT rose 0.41 cent, or 3.9 per cent, to 10.97 cents a pound, the biggest rise since December 18.

There were concerns over a fall in global sugar production due to lesser contribution from Mexico, the second-largest producer in North America.

Bumper Crop

The global development opens up an opportunity for Indian sugar companies. India is expecting a bumper sugarcane crop of 315 million tonnes against the Government's first advance estimate of 285 mt.

Shree Renuka Sugars led the pack with a gain of 19 per cent in the last one week, while Balrampur Chini Mills, Dwarikesh Sugar Industries and Uttam Sugar Mills gained 10.71 per cent, 5.12 per cent and 4.85 per cent respectively.

The gain in prices could have been sharper if not for the market meltdown during the week.

Domestic sugar prices have fallen below the PDS prices in many States including Uttar Pradesh and Maharashtra. Apart from the global developments, domestic prices are also expected to rise from June, when monsoon is scheduled to begin in many parts of the country. "Transportation becomes a problem during the rainy season which may push up retail prices. We expect prices to go up from Rs 18 per kg to Rs 22-23 per kg from June," said Mr Darmesh Bhatia, Research Advisor, Motilal Oswal.

Global Scenario

Cane harvest in Mexico, which runs through December to June, may produce about 4.6 mt of sugar this year compared with 5.28 mt in 2006.

Even if the weather turns normal, the total output is expected to be down 3.4 per cent at 5.1 mt.

In a move to hold back the slide in domestic sugar prices, the Government recently lifted the ban on sugar exports.

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