Sugar prices ease after import approval, tighter bulk stockholding limits

Domestic sugar prices are easing after the government allowed 1 million tonnes of duty-free raw sugar imports and tightened stock limits for bulk buyers

Sugar prices in domestic markets have started softening since the central government allowed imports of 1 million tonnes (mt) of raw sugar and tightened stock-holding limits on bulk buyers.

 

According to spot market data maintained by the National Commodity & Derivatives Exchange, spot prices of medium-grade sugar in Maharashtra’s Kolhapur markets fell from around ₹6,350 per quintal on August 21 to around ₹5,550 per quintal on August 25 — a fall of around 12.59 per cent.

 

Meanwhile, prices in Muzaffarnagar remained steady at around ₹5,800 per quintal during the same period.

 

Clearly, the crackdown on prices appears to be having some tangible impact on the ground, at least for now.

 

 

But how long and how far prices will remain weak needs to be watched closely.

 

Some traders said any dip below ₹5,000 per quintal could start hurting millers, particularly if the weakness persists into the next crushing season, which starts in late October. The production cost of sugar is estimated at ₹4,200-4,300 per quintal.

 

Meanwhile, news agency Bloomberg reported on Wednesday that Indian refiners will divert 350,000 tonnes of sugar originally headed offshore to the local market, people familiar with the matter said, after authorities cleared the move to ease a supply crunch. 

 

The processors could release the stockpiles to domestic buyers within a week, the people said, asking not to be named because of the commercial sensitivity of the information. That would be enough to meet total demand in the world’s most populous country for almost five days and would help tame prices that surged to a record high last week.

 

The release of the stockpiles would provide near-term relief without the need for imports, the people said. While inbound shipments would still be required later, the supplies would help tame domestic prices until the arrival of sugar from Brazil, they said.

 

Sugar demand in India typically peaks during the festival season, which starts in late August and runs through January, as people consume more traditional sweets and processed foods.

 

India’s decision to allow imports has put upward pressure on global prices, although this has eased in recent sessions on expectations that the country will not need to import as much as initially anticipated.

 

Duty-free sugar imports may total between 300,000 and 600,000 tonnes by the end of October, according to estimates from five traders, analysts, and millers surveyed by Bloomberg. That is below the 1-mt quota approved by the government, as softer domestic prices reduce the incentive for millers and refiners to increase shipments.