NCDEX Sugar Trades Higher On Seasonal Demand: April 12, 2012

Spot prices of sugar remained steady on account of seasonal demand from the bulk manufacturers to meet summer season demand amidst sufficient supplies in the domestic market. Futures witnessed range-bound trading throughout the day and settled 0.18% lower on Wednesday.

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 prices settled 0.21% lower on account of long liquidation while raw sugar futures settled 0.34% higher owing to bargain buying by the market participants. Although with higher Brazil sugar output forecasted by Conab for the year 2012-13 may cap sharp gains. 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- Mar 31, 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.

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 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.