Mumbai: Sugar prices are seen rising in the coming months on the back of a lower production outlook in the year which began on 1 October, officials said.
The production in 2007-08 is likely to be lower than earlier estimates of 32-33 million tonnes (mt) and one official said it may not even top last year’s 28.4mt after rains and a dispute over cane prices delayed crushing in the top two producing states.
Moving up: Prices of average quality sugar rose to Rs1,200 per 100kg in Maharashtra on Thursday for the first time in the current season.
Ex-mill prices of average quality sugar in Maharashtra touched Rs1,200 per 100kg on Thursday for the first time in the current season.
“This is now the new base price... Lower production outlook will further push upprices,” Prakash Naiknavare, managing director, Maharashtra State Co-operative Sugar Factories Federation Ltd, said.
“The production in 2007-08 may be lower than production in 2006-07... I expect production to be about 28mt,” he said.
He estimates Maharashtra’s contribution, the largest producer last year, at about 8mt, 1.7mt lower from earlier estimates. The state’s production last year was 9.1mt.
Prices may ease in February as consumption is lowest then, Naiknavare said.
“But overall prices will remain strong and may touch Rs1,250 levels from March onwards,” he added.
“Sugar crushing has a limited 180 days. In Maharashtra monsoon is expected by 15 June and in the first rain the crushing has to stop,” Naiknavare said.
The crushing cycle has been truncated in Maharastra by almost 45 days this year. In Uttar Pradesh millers delayed crushing owing to a dispute over cane prices with the state government, he said.
“Sugar is on a pull-back mode. Apart from delay in crushing, government has been announcing some support measures every two months or so lending support to the prices,” Lopa Sanghvi, an analyst with Anand Rathi Commodities Ltd said.
“There may be more such announcements in coming days.”
The ex-mill sugar prices had fallen to Rs1,100-Rs1,150 per 100kg levels in Maharashtra late last year, while the cost of production stood at Rs1,500.
The federal government has announced interest-free loans and freight subsidy to help millers saddled with excess supply.
“The prices have definitely bottomed out and sentiment is positive... Sugar pipeline is empty and traders may soon start buying,” C.S. Nopany, chairman and managing director, Oudh Sugar Mills Ltd, said.
“Prices in north India have crossed 1,300 levels but to break even we will still have to wait for 1,700 (per 100 kg) levels.”