Sugar prices rebound on Centre’s export proposal

Buoyed by reports of Centre stepping in to promote exports of surplus sugar stocks, prices of the sweetener are seen rebounding from ten-year lows over past few days.

However, millers and analysts were circumspect about the uptick and said that a concrete action by the government would determine whether prices stay firm.

Spot prices in Kolhapur, sugar bowl of Maharashtra, have moved up by about ₹400 a quintal over the past week to hover around ₹2,300-50 levels for the small grain, while in Uttar Pradesh it was between ₹2,450 and ₹2,800 across various centres.

On Monday, the sugar futures rose nearly 4 per cent on average on the NCDEX. While sugar for delivery in October increased by ₹93 to ₹2,421 with an open interest of 53,030 lots, the December series gained ₹95/quintal at ₹2,479 in 23,120 lots.

“The price increase is driven by sentiments and is not sustainable as there are huge stocks,” said MG Joshi, Managing Director, National Federation of Sugar Co-operatives. The industry will begin the new season starting October with stocks of over 10 million tonnes.

Food Minister Ram Vilas Paswan said the government was looking to allow exports of 4 million tonnes (mt) of sugar under a barter system with countries from which India imported agri-commodities, such as pulses and edible oils. A preferential quota system for mills to export to China has also been proposed.

“The rise is on the news of compulsory exports, which is purely speculative. I don’t think it’s sustainable since international prices are still low and prospects of exports without additional support from the government is difficult,” said an industry official requesting anonymity.

Kiran Wadhwana, a sugar trade analyst, felt that the rise could impact exports and attributed the upward swing to both reports of the Centre’s proposed move as well as reports of the sugarcane crop suffering in parts of Maharashtra and North Karnataka that have received poor rainfall.

“These factors have caused sentiments to change. But to me, this rise in temporary and is likely to mean that exports won’t happen in September since domestic price is rising while prices are falling internationally,” he said. “If the trend continues and mills don’t export for a month or two, the price situation is back to where it was,” Wadhwana added.

Abhijit Ghorpade of Ghorpade Agrovet, a sugar trader and broker in Kolhapur, said the prices may not sustain at these levels if not backed by action from the Government. The Government should immediately announce policy measures to help the industry encash this sentiment.

If domestic prices rule higher, it will benefit cash-strapped sugar mills which owed ₹14,700 crore in dues to farmers as of mid-July. Private mills in Uttar Pradesh, the second-largest sugar producing State, account for ₹7,200 crore out of the total arrears.

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