NCDEX Sugar Surges On Extended Buying: April 23, 2012

Spot prices of sugar witnessed mixed trades throughout the week owing  to ample supplies in the domestic market on one hand and demand from  the bulk manufacturers for the summer season demand on the other. However, futures bounced back on account of improved buying at lower  levels and ended 3.69% higher w-o-w.  

Expectation that government  might allow further 1 million tonnes of sugar shortly is supporting prices to strengthen. In addition to this, improved demand ahead of the summer season is also seen supporting prices. EGOM will meet on April 25th  2012 to decide on further exports of sugar. 

The Ministry of Finance has extended the zero import duty on sugar for another three months. The zero import duty regime was to conclude on March 30, 2012. As on 15th April 2012, sugarcane has been planted in 38.37 lakh hectares  against 36.69 lakh ha during the same period previous year. 

The government last month changed the release mechanism of nonlevy  quota from a monthly to quarterly basis wef from April 2012. For April-June  2012, nonlevy 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 extended losses of the previous day and settled 1.32% and 0.54% lower on Friday on reports of possible approval  of further exports of sugar from India and ample supplies of sugar in the  global markets.   

Domestic Production

As per the latest update by ISMA, India produced 24.6 mn tn sugar  between October 01- April 15, up 13.3% 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 8.5 mln tn sugar, up  9% from a year ago, UP 6.9 mln tn, up 18% on year.  

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. Panel of Ministers might consider more sugar exports under OGL for the marketing season 2011-11. 

It is noticeable that government already  allowed 3 million tons of sugar for the shipments abroad. Meanwhile, EGOM ministers will meet on 25th April 2012 to decide on major issues like additional export allowance and removal of sugar export quota.

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).

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  year (Source: Reuters).