Sugar may become marginally dearer: ICRA

Domestic sugar prices are likely to witness a modest rise over the next six months if global crude oil prices remain firm as Brazil could go for greater use of ethanol, rating agency ICRA said today.

"If international crude oil prices remain high, Brazilian sugar producers might opt for more ethanol. This could exert upward pressure on sugar prices leading to more exports from India and extending a marginal push to domestic prices," S Majumdar, analyst, ICRA told PTI.

Crude oil prices are already ruling high and a further rise would most certainly lead sugar makers of Brazil, the world's largest producer, to go for more ethanol production.

India, world's second-largest producer and the biggest consumer, is most likely to produce anything between 24-25 Million Tonne of sugar in current sugar year (October- September) against the domestic demand of around 23 MT, he said.

"With likely exports of 1.5 MT, the surplus would be a maximum of 0.5 MT," Majumdar added.

Anticipating higher production, government has allowed mills to meet their export obligations of about one million tonne.

Recently, an empowered group of ministers on food decided to allow sugar mills to export another five lakh tonne through Open General Licence (OGL).

The Food Ministry, however, is understood to be in no hurry to issue the necessary clearances for the same.

Majumdar said in case the government releases further export order answering to the industry's plea in the face of hardening international sugar prices, the country might start the next year with only a marginal surplus.

This could lead to sugar prices going up.

Domestic sugar prices started recovering since the steep decline seen during February-August 2010 largely driven by an increase in demand during the festive season, a fall in the sugar releases during October-November 2010 and a rise in the international sugar prices.

Sugar prices in retail market are currently ruling at 32 per kg as against Rs 48 in January 2010.