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Sugar prices are set to come down and hence sugar stocks (Posted - 10 April 2010)
The three-million-tonnes (mt) upward revision in current season’s sugar output projection by India, the world’s biggest consumer, has aided a fall in global prices. India has also revised next season’s forecast from 20 to 23 mt, putting an end to speculation about further imports.

Moreover, with production season beginning in Brazil, the world’s biggest producer, which is anticipating a bumper output, global prices are certain to remain under pressure.

Brazilian mills, which started the 2010-11 season from April 1, are expected to produce over 34 mt, an increase of nearly 19 per cent over 28.63 mt produced in 2009-10.

India is set to produce over 18 mt sugar this season against the earlier estimate of 15 mt. India also revised the projection for the next season beginning October to 23 mt.

Record production by India and Brazil has set a declining trend in prices.
New York raw sugar futures have softened to $16.16 cents alb after it touched a 29-year high of 30.40 cents a lb on February 1.

Countries such as Pakistan have put on hold their import plans. While the bull run may have ended for the industry, the consumers have a reason to be happy.

Retail consumers are now paying Rs 34 a kg for sugar, down over 24 per cent from Rs 45 a month ago. Going forward, consumers can expect a marginal relief in prices.

“Farmers got good prices and planted more sugarcane. Sugar production will be much higher in the next season and prices will move downwards.

But the government should relax the curbs it has imposed to bring down prices. Any continuation of this policy will hit the industry and affect sugarcane payments to farmers. With the collapse in global prices, there is a need to act immediately,” said Vivek Saraogi, managing director, Balrampur Chini, and president of the Indian Sugar Mills Association.

Saraogi added there was no need for further imports. “We are self-sufficient from here on,” he said. India is estimated to have signed contracts for importing 6 mt sugar, of which more than half has arrived.

Industry expects an opening stock of 3 mt for the next season. “With domestic output of 23 mt, availability for next season may be 26 mt, well above the consumption of 23 mt,” said an official.

The government has allowed bulk sugar users to import sugar at zero duty in order to keep prices of the sweetener under check.

At present, bulk consumers are allowed to keep domestic sugar stock for only ten days of their monthly requirement, though there is no such ceiling on imported sugar.

“Bulk users account for over 60 per cent of our sales. If they are given incentives to import, domestic producers will be unable to sell and make payments to farmers,” said an industry official.
Source - Business Standard

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