Sugar Settles Higher on Short Covering

Sugar futures settled marginally higher by 0.4% while spot declined 1.3% on account of higher supplies and subdued demand.

EGOM on food yesterday approved export of 1 mln tn more sugar for the season started October 2011. The additional exports would be notified after the government gets clearance from the Election Commission as a model code of conduct is in force due to assembly elections in five states.

The sugar directorate has issued release orders for export of 9.15 lakh tn sugar from the first tranche of 1 mln tn. The sugar industry has been demanding permission to export additional 2 mn tn.

UP millers have sought government intervention to recover from the losses incurred due to lower realization from Sugar on account of higher cane prices.

Government on 1st February 2012 approved sale of 14 lakh tn total non levy Sugar for the month of February including 1.5 lakh tn unsold quota of January 212.

Liffe as well as ICE Raw Sugar settled 2.5% and 1.5% lower on Tuesday after ratings agency moody’s decision to down grade six other countries dampened investors sentiments.

The premium for white sugar over the raw sweetener rose to the highest this year on speculation supplies for delivery into the March futures are limited. However, with major white sugar exporters like the European Union and India not being able to deliver against Liffe, quantities deliverable against March expiry in London are rather limited thus supporting the upside till the expiry.

Domestic Sugar updates

According to ISMA, Maharashtra, the country's largest sugar producer, is likely to produce 9 mn tn sugar in 2011-12 season, followed by UP at 6.8 mn tn and Karnataka at 3.8 mn tn.

Uttar Pradesh, India's largest cane producer, crushed 34.7 mln tn cane during the period Oct- 01 to 23rd Jan 2012 compared with 27.1 mln tn a year ago, it said. Though the quantum of cane crushing was higher, recovery was lower at 8.49% compared with 8.85% a year ago as crushing began early

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

Global Sugar Updates

China’s Oct-Jan Sugar output falls 8% to 5.22 mn tn. Chinese sugar output is estimated at 12 mn tn, however, final output may be revised downward due to adverse weather conditions.

The sugar-cane crush in main center-south producing region of top grower Brazil totaled 492.7 million metric tons in the 2011-12 season that started April 1 to Jan. 16, down 11.4% on the year, sugar-cane industry association Unica said. No dramatic turnaround in the Brazilian crop is expected in 2012-12 as the fall in production last year was due mainly to an ageing cane crop which would continue this year.