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Sugar prices trading in tight range, may rise further on tight supplies: Angel Broking

Posted On: 2017-03-04 23:56:39

Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Broking):

Sugar prices on National Commodities and Derivative Exchange (NCDEX) have been trading in a tight range between Rs. 3780- 3950 per quintal during the first two months of 2017. Sugar price on NCDEX touched a life time high of Rs. 3,950 per quintal twice but did not able to cross this level.

There is fear that the government may take immediate policy action to scrap the import duty to control prices if they rise beyond certain levels. Currently, import of raw and white sugar currently attracts 40% customs duty. The sugar mill in the country is not keen in the idea if allowing sugar imports. Thus, they are keeping adequate supplies in the physical market so keep the prices under control.

As per government sources, it may allow duty-free import of sugar up to 1 million ton in current season under open general license if the wholesale price rise above Rs. 4,100 a quintal.

Indian Sugar Mills Association (ISMA) in its latest press release estimated that the production of sugar is down by 18.5% to 16.25 million tonnes (mt) during Oct-Feb period, compared to 19.94 mt produced a year ago.

Earlier ISMA has estimated production at 21.3 mt for the current season that started in October, against 25.1 mt last year. An opening stock of 7.6 mt will result in the overall sugar availability of about 29 mt, which may meet the domestic demand of around 25 mt. Thus the carryover stocks will be in tight range of 4 mt when the new season crushing commences in November.

Due to tight carryover stocks, country may need to import sugar, later in the season to fulfill domestic stocks of around 6.4 mt for 3 months (Oct- Dec) to meet demand until cane crushing gathers pace by December.

Thus, we expect the price to touch Rs. 4,000 per quintal in futures market during the current season as the crushing season comes to end in Maharashtra and Karnataka early.


Source: Equity Bulls

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