Heavy selling leads to plunge in spot and future sugar prices

(The Economic Times) –  PUNE: Heavy selling by Uttar Pradesh sugar mills in order to make cane payments within the stipulated period of 14-days has led to plunging of the sugar prices, both in spot and futures market in last two days.

New York sugar futures fell 2.6 percent on Wednesday, while London white sugar futures dropped 1.74 percent. The key January sugar on the National Commodity and Derivatives Exchange was 0.41 percent down at Rs 2,890/quintal by 4:44 p.m. In the Kolhapur market in top producing Maharashtra state, the most traded S-variety fell 0.68 percent to Rs 2,905/per quintal. Sugar prices continued their slide at the wholesale market too. Small Sugar (S-30) tumbled by Rs 10/36 per quintal to Rs 2,991/3,045 from Wednesday’s close of Rs 3,001/3,081 while the medium sugar (M-30) also dropped by Rs 30 per quintal to Rs 3,076/3,182 as compared to Rs 3,076/3,212 yesterday at the Vashi market.

Sources in the country’s sugar industry told ET that the UP government has started filing first investigation reports (FIRs) against those mills that do not make cane price payment within the stipulated period of 14 days. As the result, the UP mills are selling heavily bringing down sugar prices in top sugar producer Maharashtra.

Shyamlal Gupta, secretary, Uttar Pradesh Sugar Mills Association said, “There is pressure on the UP mills to sell sugar as they have to make the cane payments. The sugar mills in UP are in worst financial position. With 8.2% sugar recovery, the production cost is about Rs 36/kg while the mills are selling the sugar at Rs 29/kg.”

There was a downward trend in sugar prices from last ten days. In Maharashtra, ex-mill sugar prices have declined by Rs 250/quintal in last ten days while in UP, the decline was Rs 150/quintal during the same period. Mills were holding on to stocks in the hope of improvement in prices. Now, they find pressure to sell the quota requirement. “We were selling very less in the first half of December in the hope that the prices may improve. Today, we have not been able to sell even half of the current month’s quota. So naturally, now there is pressure to sell the quota requirement,”said chairman of a Maharashtra-based sugar co-operative.

Sugar production in Maharashtra state is likely to miss the government estimate of 9.3 million tonnes by by 0.3 million tonnes. “The supply situation is very comfortable. We have good carry forward stocks, and now supplies are rising from new season crushing, but demand is weak,” said Badruddin Khan, associate vice-president of research, Angel Commodities Broking.