Sugar prices touch three-year high

Low output and import duty waiver on refined sugar cause rates to rise.

Despite continued government efforts, sugar prices have touched a three-year high, reflecting the demand-supply mismatch in the commodity.

Ex-factory prices in Uttar Pradesh, the country’s second-biggest producing state, touched a three-year high of Rs 2,400 a quintal, up nearly 3 per cent from Saturday’s close. Spot prices in Maharashtra, top producer of sugar, jumped 5.2 per cent to Rs 2,378 a quintal.

“Spot prices were responding to strong summer demand from cold drink makers,” said an analyst at Religare Commodities. “Lower output estimates fuelled the upside further.”

This price movement is contrary to expectations that rates would not be affected by the government’s decision last Friday to waive the 60 per cent import duty for the import of a million tonnes of refined sugar by government agencies.

According to the latest projections by the Indian Sugar Mills Association (Isma), the country’s sugar output in the season ending September 30 is likely to touch a four-year low of 14.5 million tonnes. This is a decline of over 45 per cent from the 26.5 million tonnes last season. The fall can be attributed to lower acreage under sugarcane and an over 10 per cent drop in recovery.

However, along with the opening stock of 8 million tonnes and raw sugar imports of 1.5 million tonnes, the season’s availability is estimated at 24 million tonnes against a consumption of 22.5 million tonnes. Isma also expects next year’s output to improve significantly as farmers have got timely payments.

The output decline is reflected in the market prices. In Delhi, the average retail price has touched Rs 27 a kg, up 35 per cent since October.

The price rise has prompted continued government intervention since the commodity has a weight of 3.62 per cent in the wholesale price index inflation, more than cement (1.73 per cent), wheat (1.38 per cent) and just lower than iron and steel’s combined weight of 3.64 per cent.

The industry, however, holds that these prices are necessary to make timely payment to sugarcane farmers so that they don’t shift to alternate crops.

Sugar price has increased in tune with sugarcane prices. “We cannot dissociate the sugar price from the cane prices,” Isma President Samir Somaiya said last month.

Sugarcane price in Uttar Pradesh increased by Rs 15 a quintal to Rs 140.