The Hindu Business Line : Sugar futures expected to trade higher

Mumbai, Jan. 20 After a lull, sugar futures on NCDEX are expected to trade on the higher side in the short to medium term due to delay in cane crushing in Uttar Pradesh and Maharashtra.

Caught between a bearish market and high cane advisory prices set by the Uttar Pradesh Government, sugar mills delayed crushing, leading to fall in production.

Sugar Season

The Union Agriculture Minister, Mr Sharad Pawar, said recently that Indian sugar production in the ongoing sugar season started in October 2007 would fall by 8 per cent to 26 million tonnes (mt) due to the delay in crushing.

Earlier, the Indian Sugar Mills Association lowered its production estimates for 2007-08 by three mt to 30 mt. However, analysts predict that the fall could be more if the delay in crushing continued. The mills have also urged the Government to reduce the State advised prices from Rs 1,100 per quintal to Rs 900 per quintal.

The Union Agriculture Ministry has allocated 41 lakh tonnes as free sale quota for January-March. For January, 13 lakh tonnes have been allocated as non-levy quota.

“The Government decision augurs well for sugar mills as there are no major carry forward stocks from previous months,” said Mr Sushil Sinha, Regional Head, Karvy Comtrade.

Export demand

Mr Sinha said Bangladesh and Sri Lanka were showing keen interest to import sugar from India. The Government has recently allowed export of raw sugar along with refined sugar.

Brazil sugar output is set to be lower this year due to the sugar mills concentration on production of ethanol as it was fetching better margins.

“Brazilian cane mills are currently earning more from ethanol sales than sugar, and international sugar buyers will have to match or better the price of the biofuel,” said an analyst.

According to recent reports, cane mills in Brazil have used up to 55 per cent of their crop for ethanol in the harvest that ended a few weeks ago. This compares with a near 50-50 mix from the previous crop season.

“The active Sugar M Grade currently trading at Rs 1,500 per quintal is expected to test Rs 1,575 per quintal in the short term. Later, a correction can be expected towards 1500-1475, said Mr Sinha.

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