Sugar Rises on Firm Demand

Sugar futures settled 0.50% higher extending gains of the previous day on expectations of positive decision with regards to exports, while spot prices traced Futures and ended 0.98% higher on Thursday. However, higher sugar quota expectation for the month of December 2011 and expectations that crushing will gain pace very soon in Maharashtra will cap sharp gains.

Government has released higher sugar quota of 19.15 lakh tonne (levy sugar -2.14 lakh tonne and non levy sugar- 17 lakh tonne) for the month of November 2011 compared to 16.15 lakh tonnes in November 2010.

Cane Crushing Starts In Maharashtra, top sugar producing state 31 mills in Maharashtra have started cane crushing for the current season, after a delay of almost a month on the back of extended rains and dispute over cane pricing.

The dispute over purchase prices has nearly been resolved and the minimum price to be paid will likely be settled within a week. However, there is still no clarity on a dispute over cane pricing in UP.

There are reports that delay might be witnessed in deciding the exports under OGL this year as the millers and farmers have not yet come to a agreement regarding the cane price as government is not getting clarity regarding production estimates of sugar.

Liffe White Sugar and ICE Raw Sugar futures settled 0.10% and 0.90% up respectively due to reports of lower output in Brazil.

Domestic Sugar updates

Cane output in Maharashtra is expected to rise to 82.5 mn tn during 2011-12 from 80.3 mn tn last year, while sugar output is likely to increase about 2.5% to 9.3 mn tn.

Indian Sugarcane production is estimated higher by 0.9% at 34.22 mn tn for 2011-12 season starting October 1, 2011. ISMA has projected sugar production at 26 million tonnes for 2011-12.

With the opening stocks of 6 mn tn, domestic Sugar supplies are estimated at 32 mn tn against the domestic consumption of around 23 mn tn. Thus there is a wide scope for exports from India.

Global Sugar Updates

Brazil's main sugar industry group Unica showed production to fall at 30.8 million tonnes from 31.57 million tonnes. The crop will decline for the first time in 11 years due to bad weather during crop development and poor yields from aging cane fields have led Unica to cut its output forecasts. (12th October 2011).

China, the world's largest sugar consumer, has imported 1.6 million tons of sugar in the first 11 months of 2011, with preliminary data for the full year likely to be issued around October 10.