NCDEX Sugar Remains Firm On Seasonal Demand: April 16, 2012

Sugar prices remained steady to firm on account of seasonal demand from the bulk manufacturers to meet summer season demand amidst sufficient supplies in the domestic market. Futures traced the spot prices and settled 1.02% higher on Thursday.

Expectations that the 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-June 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 Futures settled 0.54% and 1.13% higher on account of weak dollar. Although with higher Brazil sugar output forecasted by Conab for the year 2012-13 sharp gains may be capped.

In the global markets sugar traders are adopting wait and watch policy and are closely watching the developments in Brazilian sugar cane crop.

Domestic Production

As per the latest update by ISMA, India produced 23.2 mn tn sugar between Oct 01- Mar31, up 13% from the year ago period (Source: Reuters).

ISMA has estimated sugar output in 2011-12 at 26 mn tn. In the first half of the season, Maharashtra has produced 8.0 mln tn sugar, up 11.4% from a year ago, UP 6.6 mln tn, up 14.8% on year, while Karnataka produced 3.5 mln tn, up 16.2%.

The association said it expects Maharashtra, UP and Karnataka to produce 9.0 mln tn, 6.8 mln tn and 3.8 mn tn sugar respectively, in 2011-12.

Exports

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

The minister’s panel allowed 1 mn tn of unrestricted white sugar exports under OGL on 26th March 2012. This takes total exports in the current season at 3 mn tn, 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 3 1 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).

Unica said the center-south cane crop will yield 33.1 million tonnes of sugar in 2012/13, up from 31.3 million last year as investment in plantings and better weather help the crop turn the corner after its first decline in more than a decade last yearn (Source: Reuters).