Sugar prices to decline as UP, Maharashtra begin cane crushing

The market expects a rise in sugar output of 24% this year

Sugar prices are likely to decline by five per cent with the arrival of new-season output.

Crushing of new-season cane is scheduled to begin this week, with dozens of mills in Uttar Pradesh starting the procuring from farmers. The first of this sugar is scheduled to hit the market by the end of this month.

On the state government's recommendation, mills in Maharashtra are also set to commence crushing of cane on November 1, two weeks later than they'd originally planned. Sugar prices at the Navi Mumbai wholesale market (M-30 variety) have been at Rs 3,840-3,900 a quintal for nearly two months.

The carryover stock of cane for the new sugar year (it began on October 1) is about four million tonnes. The market expects a rise in sugar output of 24 per cent this year.

"Mills in Maharashtra and UP are offering discounts to consumers for delivery in the second week of November. Hence, sugar prices are likely to decline with arrival of new-season crop," said Praful Vithalani, chairman, All India Sugar Trade Association.

Mills in UP are offering Rs 3,650-3,680 a quintal for delivery in the second week of November; those in Maharashtra for Rs 3,400-3,450 a qtl.

"Sugar's price would not decline abnormally. We estimate a marginal increase in cane SAP (the government-set minimum) in UP, which would keep cost of production elevated. To get farmers' cane arrears cleared, mills' realisation has to be higher than the cost of production," said a senior industry official.

Mills in UP have decided to start crushing without clarity on the SAP; the government announcement is expected soon. An increase in SAP will partly offset their expected increase in sugar recovery with a new cane variety.

Indian Sugar Mills Association has forecast production at 25.1 million tonnes for the current crushing season (October 2017 to September 2018), a sharp increase from 20.3 mt the previous year.