Informist, Thursday, Sep 14, 2023
By Afra Abubacker
MUMBAI - Allaying concern over sugar supply, traders said opening stocks of the sweetener in October are likely to be broadly adequate to meet the likely rise in demand till the end of November, covering key festivals like Navratri, Dussehra and Diwali.
As on Oct 1, traders see sugar season opening stock at 4.5-5.5 mln tn, which they said would be more or less sufficient to meet demand till sugarcane crushing starts in November. The crushing season typically runs from October to April, but this year mills in Maharashtra are likely to defer crushing by a month as patchy rains in August affected growth of the sugarcane crop.
Sugar stocks may be enough to last till November as sales quota during the festival season is seen also higher at around 2.5 mln tn per month as against the typical quantum of 2.0-2.2 mln tn.
The government is watching over stocks of sugar as prices have risen sharply ahead of the festival season. On Friday, the Department of Food and Public Distribution wrote to sugar mills to disclose by Tuesday their stock position and sales data from May to August.
The opening stock on Oct 1 is likely to be 4.0-5.0 mln tn, said Naresh Gupta, a sugar dealer in Uttar Pradesh. At the beginning of September, sugar stocks were around 6.3 mln tn, Gupta said.
Annual sugar consumption in India is around 27 mln tn. According to Gupta, monthly consumption is 2.2-2.3 mln tn, and it is not evenly spread through the year. "During winter, demand is low and in festive season it is high," said Gupta.
The Centre decides the quantum of sugar mills have to sell every month. During festival season, the government is concerned about sugar availability at affordable prices. As a result, stocks and crushing operations are monitored vigorously.
"The government has sought precise data on stock position...until that data is known, we estimate
opening stock on Oct 1 at 5.85 mln tn," said Prakash Naiknavare, managing director of National Federation of Cooperative Sugar Factories. The federation's estimates include the output from the ongoing crushing operations in Tamil Nadu and Karnataka.
Though mills in Uttar Pradesh and Maharashtra ended crushing by May, operations are still on in Karnataka and Tamil Nadu, where around 14 mills are crushing cane, said Naiknavare.
However, some market participants have a different view and discount the remaining output from Karnataka and Tamil Nadu. On the upper end, stocks are not likely to be more than 5.0 mln tn, said Gupta.
Cane crushing in major producer Maharashtra is likely to be delayed by a month as uneven rains in August affected yield. Further, Diwali is late this year, in mid-November, which will lead to shortage of labour.
PRICES
Sugar prices have firmed up in the last two months. In Jul-Aug, prices had risen around 100–150 rupees per 100 kg, and have moderated slightly in September, said traders.
"Sugar prices rose in August due to a lot of speculative buying," said Gupta.
Currently, sugar is quoting 3,800-3,950 rupees per 100 kg in Maharashtra and 3,770-3,850 rupees in Uttar Pradesh. "Sugar prices are likely to be stable this month," said Mukesh Kuvadia, secretary of Bombay Sugar Merchants Association. "There are not many festivals in September apart from Ganesh Chaturthi."
"Prices have come down 20–30 rupees after the government asked mills to submit sales data," said a Kolkata-based trader. "Demand is depressed...especially in the resale market. There is a fear in the market as the government is going after mills and does not want sugar prices to rise."
Earlier this month, The Hindu BusinessLine reported that the government is mulling imposition of stock limits till November. The last stock limit imposed on sugar was in 2016 when traders were not allowed to hold more than 1,000 tn in Kolkata and 500 tn in other parts of the country.
However, according to traders, imposition of stock limits is not sufficient to check prices in the long run. "Normally, as far as sugar trade is concerned, traders don't carry much of stocks," said Gupta.
"Sugar prices are likely to have a positive bias as current stocks are lower than last year," said a dealer.
Increased demand in October ahead of Diwali is also likely to push up prices. The government has to accept that sugar production is lower this time and price rise is only an after-effect, dealers said.
"In the last three years, sugar production was in surplus, and prices were largely stable. But now production has been affected by (uneven) rains and prices have increased," said Gupta.
The Indian Sugar Mills Association cut production estimates for 2022-23 sugar season ending in September to 32.8 mln tn from 34.0 mln tn forecast earlier. It has also lowered estimates for the upcoming season to 31.7 mln tn, down 3.4% on year from 32.8 mln in the ongoing season.
The lowering of estimates is mainly due to lower crop yield in Maharashtra.
Sugar prices have not risen much. If you compare average inflation in any other commodity, sugar prices are largely stable and have risen only gradually, said Kuvadia.
Informist had earlier reported that the recent rise in fair and remunerative price of sugarcane has increased production cost by 1 rupee to 35.5 rupees per kg. Fair and remunerative price is paid by sugar mills to farmers on sugarcane purchases.
"Of the 535 mills in the country, the production cost of sugar of some mills is above 38 rupees and that of some below 34 rupees. Therefore, on an average, the production cost will rise by 1 rupee for the upcoming season," Naiknavare said.
Sugar is a highly regulated commodity as the Centre sets export quota and monthly sales quota. The price of sugarcane is also fixed by the Centre and state governments. The government also bears interest subvention for loans disbursed to sugar mills to increase ethanol production capacity to achieve the government's target of 20% ethanol blending in petrol by 2025. End
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.