Sugar to Trade Sideways on Likely Fresh Export Approval

Spot prices of Sugar settled 0.64% higher on Tuesday on hopes that government would approve additional exports of 10 lakh tn during the EGOM meet. Futures however, traded firm in the early part of the trading session but witnessed profit booking at higher levels and settled 1.12% lower yesterday.

The Empowered Group of Ministers (EGoM) OKs 1 mn tn sugar exports 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 853,891 tn sugar so far this season from the first tranche of 1 mln tn. The sugar industry has been demanding permission to export additional 2 mn tn.

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. Total quota for the month of February stands at 16.1 lakh tn including 2.1 lakh tn of levy quota. According to ISMA, India produced 13.28 mn tn of Sugar in the first four month of the season that started in October 2011.

India produced 10.45 mln tn sugar in the first three-and-a-half months of the season that began Oct 1, 19% higher than 8.77 mln tn a year ago. Liffe as well as ICE Sugar futures traded rangebound and settled 0.02% and 0.33% higher on Wednesday owing to reports that demand from China might improve in the coming days. Further, stronger economic data from countries including the United States and Germany supported prices.

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.

Outlook

Sugar prices may trade sideways to up on reports of fresh export approval and expectations that govt may consider partial decontrol of Sugar industry may keep sentiments firm in the short term. Decision with respect to notification on exports is still yet to come.

This may resist prices from trading higher In the long term prices are expected to take cues from the Sugar output estimates in the domestic market, change in government policies with respect to exports and International Sugar prices, which would be influenced by the supplies from Brazil, Thailand and India and demand from China.