Sugar Recovers to Post 9% Weekly Gain, But Don't Expect Any Runaway Rally

MUMBAI (Commoditiescontrol) - The ex. mill sugar prices shot up 9% during the week in the country, after government doubled import duty and imposed a stock withholding limits on mills.

The Centre wants to prevent sugar prices from falling further amid ample supplies on the back of higher output and has taken various measures in this regard, i.e. withdrawal of stock holding limits for traders in December last year (Dec.19), increase in custom duty on imported sugar to 100% on Tuesday (Feb 6).

On Thursday (Feb 8), the Centre too imposed the stockholding limits on sugar mills to restrict supplies.

Moreover, the government is also considering removing of 20% export duty on sugar to support local sweetener prices by shipping excess sugar available in the domestic market.

Total sugar production of India is estimated to increase by 28% at 261 lakh tonnes in current sugar season 2017-18 (October to September), against the annual domestic demand of 250 lakh tonnes, as per ISMA.

Meanwhile, there will be surplus sugar supplies in domestic markets during ongoing sugar season.


India's Sugar Stocks At 135 lakh tonnes As On Jan 31

India's ongoing sugar season 2017-18 started with opening stocks of 38.76 lakh tonnes of sugar as on 1st October 2017.

While country's sugar production has reached at 170.67 lakh tonnes as of January 31.

Additionally, Government had allowed imports of 3 lakh tonnes of raw sugar in September 2017. Out of that only 2.35 lakh tonnes of raw sugar had been shipped during November 2017. While after refining the raw sugar, about 2 lakh tonnes of white sugar obtained by 15th December, 2017.

The total sugar consumption in the country between October 1st, 2017 and January 31st, 2018 (2017-18SS) is estimated at 75 lakh to 80 lakh tonnes.

However, the total availability of the commodity in the country at the end of January is expected to be around 135 lakh tonnes (as on Jan. 31).

Meanwhile, higher supplies of commodity in local markkets kept sweetener prices under pressure during last four months. Although, the ex. mill sugar prices dropped 15% since new sugar season started, while wholesale prices also fell nearly 16% so far.

Nevertheless, the Centre has imposed stock-holding limits on sugar mills for the next two months to arrest falling prices.


The circular revealed that no producer of sugar shall hold sugar stock less than quantity at the end of the month mentioned as below.

A) February 2018: Not less than 83% of the closing stock as on the last data of January 2018 + the sugar produced during the month of February 2018 - sugar exported during the month of February 2018.

B) March 2018: Not less than 86% of the closing stock as on the last date of February 2018 +the sugar produced during the month of March 2018 - sugar exported during the month of March 2018.

2) Closing stock of sugar of individual producer at the end of the month shall be calculated as under:


"Opening stock of sugar as on 1st day of the month + sugar produced during the month - sugar sold from the sugar mill during the month - sugar exported during the month."


According to the govt. circular, in current month sugar mills of the country have to hold minimum 83% of their stocks left from January, while mills can't sell the sugar production of this month.

While if there any exports during the month will consider separately and stockpile limit will not apply to exports quantity made by the mills.

Similarly, in next month mills have to retain 86% of Sugar stock left from current month as on Feb 28, and also mills also can not sell sugar produced in March. The sugar exports excluded from stockholding limit.

However, sugar supply in February month will be 23 lakh tonnes, 17% of 135 lakh tonnes the ending stock on Jan 31. Which is higher than the average monthly demand of 19 lakh tonnes in India.

Sugar production of February month is expected at 60 lakh tonnes. Meanwhile, the ending stock as on February 28 is estimated to be around 172 lakh tonnes, after deducting approximate 23 lakh tonnes of sugar consumption in current month.

Moreover, sugar mills need to maintain 86% of stock left from current month, and sell 14% of closing stock as on Feb 28. Although, more 24 lakh tonnes of sweetener stock available to supply in domestic market in March month.

On other hand, the production of sugar has been estimated at about 260 to 265 lakh tonnes in the current sugar season. While the domestic consumption is estimated at about 250 lakh tonnes, the stock position at the close of the current sugar season on Sept. 30th, 2018 is likely to be at 50 lakh to 55 lakh tonnes which will be carried forward for the next sugar season 2018-19.

However, there will be enough availability of sweetener in domestic market during current season and the recent hike in sweetener prices may not remain for long. While sugar prices may not see any runaway rally in long term on estimated higher output in current season 2017-18.

Source: ISMA

(By Commoditiescontrol Bureau: +91-22-40015532)