Sugar futures relaunched

The relaunch of sugar futures trading at a time when international prices are at a 29-year peak was received with enthusiasm by domestic traders and speculators. The government had banned sugar futures in May 2009 to help control soaring prices.

At the Multi Commodity Exchange, sugar contracts for January delivery shot up by Rs 166, or 5.44 per cent, to close at Rs 3,216 a quintal, with a business turnover of 452 lots. Likewise, sugar for delivery in February gained Rs 159, or 5.11 per cent, to Rs 3,269 a quintal, with an open interest of 307 lots. Contracts for March delivery ended higher by Rs 142, or 4.48 per cent, to Rs 3,312 a quintal and a turnover of 165 lots.

 

At National Commodity Exchange, too, volumes were close to the six-month daily average of around 19,000 tonnes prior to the ban. “One should avoid judging anything based on first-day volumes. There is enthusiasm, but it may be short-lived, as corporates are not participating and the interest is primarily from speculators,” said Gnanasekar Thiagarajan, director at Mumbai-based Commtrendz Research.

According to official estimates, after a gap of two seasons, the country is estimated to see higher production of 24.5 million tonnes of sugar in the 2010-11season. This is higher than the annual demand of 23 million tonnes. The second-largest sugar producer after Brazil was forced to import large quantities, after farmers diverted land to alternate crops.

The government is now reversing measures taken to control high sugar prices. It has allowed sugar exports and removed the weekly release mechanism. Retail sugar prices, which touched a high of Rs 50 a kg early this year, is now selling at around Rs 35 a kg.