Sugar prices to stay firm on global cues

Mumbai: Sugar prices, spot and futures, may continue to remain firm over the next few days mainly on reports of unviable imports, firm overseas markets and reports of lower domestic supplies.
Sugar M grade 200 (Kolhapur) prices were quoted Rs 50-60 higher to trade at Rs 2,281 for May contracts and Rs 2,408 per quintal for June contracts on NCDEX over previous week due to drop in domestic output and strong international prices.
Global prices rose by 2.5% to trade over 15 cents per pound in past two weeks. Thus, landing cost of raw sugar is higher than the domestic prices. The landed cost of raw sugar in Indian ports will be in the range of $395 a tonne, whereas till now, no mill has contracted at above $330-340. London August white sugar contract moved $8 per tonne higher at $427 per tonne on Saturday.
The ex-factory cost of the processed white (imported) sugar at these rates would be around Rs 24,500 a tonne for mills close to ports and Rs 26,000 for those in Uttar Pradesh, sources said.
Spot prices were quoting higher around Rs 2,236 per quintal in Kolhapur market and Rs 2,490 per quintal in Muzaffar nagar. “Though domestic futures market showed some weakness last week, prices may continue to trade higher during the current week. Rising international prices are making the imports unviable. Talks of lower yield from Brazil’s central South crop have led New York and Liffe sugar to recover in the past few weeks, an analyst with Angel Commodities said.
“Lower output and unviable imports at current prices are likely to support the domestic sugar prices in the short to medium term with expected target of Rs 2600 per quintal,” analyst said.

Margins fail to dent sugar futures

Strong fundamentals and good summer demand once again pushed up the sugar futures market on Monday after a short correction last week and may continue to rise over the next few days, despite the imposition of special margins levied by Forward Markets Commission (FMC) to curb the excess speculation in the commodity.
Despite the facts that government’s efforts to control the domestic prices by imposing numbers of measures including approval of duty free imports of white sugar, imposition of stock limit, additional release of free sale quota and special margins on long positions of all running contracts, futures prices on the National commodity & derivatives exchange (NCDEX) on Monday increased by 2% over the previous day.
NCDEX June contracts jumped up by Rs 46 to finish at Rs 2,341 per quintal over previous day on continued support even after the report that NCDEX and MCX imposed special margin of 5% on sugar futures to curb volatility in prices. With these special margins, the total margins on sugar contracts would be 17.5% including an initial margin of 7.5% and special margins of 10%.
“I don’t think special margins will have any practical impact on the futures market as spot prices in North India are still ruling higher by Rs 100 over futures prices,” a leading trader of Kolhapur said.
“Consideration the good summer season demand, we don’t expect much downside in prices, despite the increase in overall supply,” he said.
Spot prices of sugar medium grade in North India are already ruling high at Rs 2,445 per quintal in Muzaffarnagar and Rs 2,415 in Delhi market. In Navi Mumbai, medium grade prices were ruling at Rs 2,280-2,370 per quintal.
The FMC was recently asked by the Committee of Secretaries (CoS) to watch the movement in sugar prices in the futures market and take necessary steps to curb excessive speculation.
In the next round of measures, the government may ask sugar mills to sell some stocks directly to co-operatives like Kendriya Bhandars at mutually agreed price. Also the regulator may even increase special margins by another 5% over the next few days. The government may also consider the proposal to convert excess (unsold) April free quota into levy sugar.
“From the medium term perspective, fundamentals for sugar remain strong due to lower production estimates in the India as well as rising deficit in global markets. World sugar demand is expected to outstrip supply and build a larger deficit in 2009-10," an analyst with Angel Commodities said. (source: Financial express)

Higher supply fails to curb sugar prices, spot up 7.5%

Increased supply for summer by the government and imposition of stocks limit for traders announced last months have failed to curb spot prices of sugar in the physical market over the past four days.
Improved summer season demand coupled with lower crop estimates kept sugar prices firm at the major terminal markets including Delhi, Muzaffar Nagar, Mumbai and Kolhapur, traders said.
Sugar prices of medium grade in Delhi, Muzaffar Nagar and Kolhapur have increased by Rs 160-165, or 7.5%, to trade at Rs 2,345, Rs 2,335 and Rs 2,170 per quintal, respectively.
On the futures trading platform, NCDEX April contracts (Kolhapur delivery) also rose by 4% to trade at Rs 2,171 on Monday over last week.
“Trading interest has shifted from April to May contracts,” a trader said.
Spot prices in Mumbai also gained significantly and crossed Rs 2,300 per quintal on continued buying from bulk consumers.
“Overall monthly supply of nearly 19 lakh tonne for the current month is enough to cater the domestic demand, Mukesh Kuvadia, secretary, Bombay Sugar Merchants' Association (BSMA) said.
Overall fundamentals remain supportive for the prices with lower output forecast in India and a global deficit of more than 43 lakh tonne, up from a previous projection of 36 lakh tonne, sources said.
“Sugar imports, both raw and white even at zero-duty, have become unviable in the present scenario as international prices are ruling high. Thus, despite government's effort to ease import norms, we don't expect imports to take place in the coming weeks,” an analyst with Angel Broking said.
From the medium term perspective, fundamentals for sugar remain strong due to lower production estimates for India as well as rising deficit in global markets. Global sugar demand is expected to outstrip supply and build a larger deficit in 2009-10, she said.
Sugar production would touch 150 lakh tonne for season 2008-09, according to SL Jain, director general, ISMA.
“Prices closed above its five days SMA, 20 days SMA and 65 days SMA indicating an up trend. RSI is at 70.01 and is currently moving in the overbought region,” technical analyst said. (Source: Financial Express)

Govt rules out slapping limit on sugar stocks

New Delhi: The government on Monday ruled out imposing limit on stocks of sugar a trader can keep, amid speculations that such curbs might be slapped to check possible hoarding and contain the price rise.
“There is no plan to impose stock limits (on sugar) as of now,” food and agriculture Minister Sharad Pawar said on the sidelines of a conference in New Delhi.
Sugar prices in India, the largest sugar producer after Brazil, have risen dramatically this season, starting October, due to a projected 32% decline in the output to 18 million tonne, prompting the government to allow millers to import duty-free sugar and sell in the domestic market.
Trade sources were anticipating curbs on stocks, keeping in mind the general elections this year. According to the ministry of consumer affairs, retail prices shot up to Rs 25 at a few major cities as on February 13 from Rs 20 in the beginning of the 2008-09 season. (Source: Press Trust Of India)

Sugar outlook 2009: Fitch

The outlook for India sugar in 2009 is positive and the sweetener may buck the commodity trend, said Fitch Ratings in its latest assessment of the sugar sector. Sugar price increase was unavoidable because of lower output, the report pointed out.
Prices Range-bound
The report said the worst days for sugar are over, and prices are expected to remain range-bound through various regulatory measures. Sugar is an essential food item of mass consumption. The report maintains a stable outlook for the sector in the current calendar. Domestic rates
Despite the policy of duty-free import of sugar for processing into white sugar for domestic consumption and an export obligation to be fulfilled within 24 months, domestic prices would continue to rise to some degree mainly due to estimated decline in global sugar production and possible global deficit situation, Fitch pointed out.
Bright outlook
While most companies posted losses last year, Fitch expects the profitability of sugar companies to improve this year.
In the short-term to medium term, revenues as well as profitability continue to depend largely on sugar revenues, despite efforts to diversify, the report remarked.
Pointing out that diversified companies that are well integrated (distillery, co-generation) rather than pure sugar companies are well placed to enjoy profitability, Fitch said that growth and contribution of non-sugar business to incremental revenues flowing to the bottom line of sugar companies would remain marginal. (source: The Hindu Business Line)