Sugar Prices Continue Rising as Output Drop by 10%

Top sugar producer state Maharashtra is projected to increase its output by 3% but the recovery rate for sucrose is lower. Current data of sugar processed up to December-January shows a drop of almost 10% in UP alone and around 2.5% countrywide, compared to the same time last year.

Food minister Sharad Pawar has said the country will have enough sugar this year, but there is concern at the highest level in the government that the output could be low and sugar prices will continue to remain high.

Prime minister Manmohan Singh has expressed concern at his Wednesday meeting with the Indian Sugar Mills Association (ISMA) and Mr Pawar over the sugar output projections this year and their possible impact on consumer prices, an official told ET.

Current data of sugar processed up to December-January shows a drop of almost 10% in UP alone and around 2.5% countrywide, compared to the same time last year.

If this trend keeps up the rest of the crushing season, total output this year could be much lower the estimates of 16 million tonnes, turning the food ministry calculations topsy turvy.

Current projections based on trends is that output will, at best, be on par with the 2008-09 at 14.6 mt.

Analysts maintain that these fundamentals alone would keep prices high through the year although sugar has climbed down from its retail peak of Rs 50+/kg.. “His estimates of availability more than last year are based on the premise that output this year will be 16 mt. But based on current processing trends, indications are that at best, output will be 14.5 mt, same as last year. There is no way that total availability of sugar will be higher than 23 mt, as suggested,” a sectoral analyst pointed out.

After a crucial meeting of the cabinet committee on prices last fortnight, Mr Pawar maintained that 5.6 mt of sugar imports were contracted, of which 50% had already arrived here. The rest, he said, would be at ports by March.

Together with carryover stocks (industry estimates peg this at four million tonnes) and an estimated output of 16 m tonnes, this would bring the total available sugar for this year to over 24 m tonnes, more than enough to cover annual demand, he said.

Up to January 22, UP, the country’s biggest sugarcane state, had produced only 2.42 mt of sugar as compared with 2.7 million tonnes same time last year, a 10% drop in output.

UP’s crushing season is coming to a close, making it near-improbable that production will improve dramatically in the remaining part of the crushing season.

Top sugar producer state Maharashtra is projected to increase its output by 3% but the recovery rate for sucrose is lower.