NCDEX Sugar Ends Higher On Seasonal Demand: April 11, 2012

Spot prices of sugar remained steady to slightly firm on account of seasonal demand from the bulk manufacturers to meet summer season demand. Futures witnessed long liquidation at the resistance levels and settled 0.61% lower on Tuesday.

Expectations that government may consider further exports of sugar, taking into consideration higher output may lend support to the prices.

Government last week changed the release mechanism of non-levy quota from a monthly to quarterly basis wef from April 2012. For April-Jun 2012 non-levy quota is fixed at 45 lakh tonnes (excluding 1 lakh tn of carry over from last month, 12% lower compared to the same period last year.

Liffe and Raw Sugar prices settled 2.14% and 2.89% lower respectively on Tuesday on account of higher Brazil sugar output forecasted by Conab for the year 2012-13. In the global markets sugar traders are adopting wait and watch policy and are closely watching the developments in Brazil.

Domestic Production

As per the latest update by ISMA, India produced 23.2 mln tonnes of sugar between Oct 01- Mar31, up 13% from the year ago period (Source: Reuters). ISMA has estimated sugar output in 2011-12 at 26 mln tonnes.

In the first half of the season, Maharashtra has produced 8.0 mln tonnes of sugar, up 11.4% from a year ago, UP 6.6 mln tonnes, up 14.8% on year, while Karnataka produced 3.5 mln tonnes, up 16.2%. The association said it expects Maharashtra, UP and Karnataka to produce 9.0 mln tonnes, 6.8 mln tonnes and 3.8 mln tonnes of sugar respectively, in 2011-12.

Exports

With the opening stocks of 6.8 mln tonnes, domestic sugar supplies are estimated at 32 mln tonnes against the domestic consumption of around 22.5- 23 mln tonnes. Thus, there is a wide scope for exports from India.

Minister’s panel allowed 1 mln tonnes of unrestricted white sugar exports under OGL on 26th March 2012. This takes total exports in the current season at 3 mln tonnes, in line with what industry expected. The Food Ministry has issued an export order for more than 8.13 lakh tonnes of sugar, out of the second tranche of 10 lakh tonnes.

Global Sugar Updates

Brazil's 2012/13 center-south sugar cane crop that will begin crushing in weeks was forecasted at 33.8 million tonnes of sugar, up 9 percent from 31 million tonnes this season, according to Data Agro Consultant.

Brazil's sugar output will rise about 5 percent in the 2012/13 season that is now starting, the government forecast on Tuesday, as better weather and replacement of old cane plants have the crop on a recovery path after output dipped last season (Source: Reuters).

In Quarterly Market Outlook, the International Sugar Organization has increased its forecast for the global surplus in 2011/12 to 5.17 million metric tonnes, compared with its projection of 4.46 million tonnes made in November.