Global sugar price at new high of $874 a tonne

Sugar prices have zoomed to a new high at $874.5 per tonne in the global market (LIFFE near month futures) compared to $860 a tonne reported in January. The rise in global prices is attributed to uncertainty about sugar production in Brazil, the largest producer and exporter. The Brazilian sugar industry is expected to crush 536 million tonnes of cane to produce 33.7 million tonnes sugar, against the earlier projections of 573 million tonnes and 35.9 million tonnes, respectively.

High prices have brightened the scope for higher realisation from exports. India's prices work out at $ 655.96 a tonne, which shows that international prices are higher by 33 per cent.

Industry sources believe this has led to a volatility in global prices, that jumped by $100 to $112 per tonne in the last two weeks when the price was between $750 to $762 a tonne.

According to the sources, sugar mills are going to benefit from the surge in global sugar prices. In India, sugar prices are Rs 2,600-2,800 per quintal (ex- mill) in Maharashtra and Uttar Pradesh. Millers, however, are expecting Rs 3,200-3,300 per quintal, especially after the the Centre recently announced an additional 500,000 of sugar under open general license exports.

Yogesh Pande, founderpresident of Maharashtra Sugar Brokers Association told Business Standard, “The increase in global sugar price will help domestic sugar industry and an additional 10 lakh tonnes can be allowed for exports. This is necessary as the production in the ensuing sugar year 2011-12 will be around 26 million tonnes. This is in addition to the carryforward stock of four million tonnes.”

Manik Borkar, managing director Anuraj Sugar Mill said, “The increase in global sugar price will certainly bring cheer for mill owners in the country and particularly in Maharashtra, as the production has risen by three million tonnes by the end of the crushing season of 2010-2011. This will help mills to earn more due to rise in domestic prices and in turn they will be able to give more price for sugarcane to the farmers”.

A commodity analyst with Barclays Capital said, “In the short term, we are expecting sugar prices to gain further, as while the market is still expecting a return to a surplus, recent concerns over the Brazilian crop on ageing cane and low sucrose content has seen continued mark-downs in supply estimates.”