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Sugar Industry Updates

The sugar industry is going through a downward cycle with a supply glut and a resultant fall in prices and profitability. Following are the developments in the sector which are likely to affect the industry’s performance.

FMC lifts ban on Sugar Futures

Forward Markets Commission (FMC) lifted the Futures ban on Sugar on the grounds of reduced prices of the sweetener from its peak levels of January 2010 and better crop outlook. The commodity market regulator in the country lifted the ban and said that as the prices of the sweetener have dropped by 40% since January and also bumper output is expected in the year 2010 11.

India is expected to record yet another year of bumper production

Jayantilal Patel, president of National Federation of Cooperative Sugar Factories Ltd., said that “India may have a surplus of 7 million to 7.5 million tonnes in the year starting October 1, 2010 up from 5 million tonnes in sugar year 2009-10.”

Govt lowers levy quota

Food Ministry cut by half the amount that mills needs to sell to the government at below-market rates. Mills are now required to sell only 10% of their output under the levy quota to the government for resale to the poor from the year beginning 1 Oct 2010. The government had increased levy obligation in 2009-10 sugar season due to less production of sugar in the country.

The market prices of sugar are expected to rule substantially higher than the levy prices in the coming quarters. Hence, the downward revision in the levy quota will bring more profits to the sugar mills.

FRP for sugarcane in 2010-11 up by 7.15%

The Centre has fixed the ‘fair and remunerative price’ (FRP) of sugarcane for the 2010-11 sugar season (October-September) at Rs 139.12 a quintal. This marks a 7.15 per cent increase over the Rs 129.84 a quintal level applicable for the sugar year 2009-10. However, this price is still lower than the price paid by the companies to farmers.

The Tamil Nadu Government has hiked the state advised price (SAP) of sugarcane by 11.1 per cent to Rs.200 per quintal. But, Tamil Nadu accounts for a small portion of the sugar industry so as to pull down industry’s profits.

Rise in FRP & SAP is likely to encourage farmers to sell more sugarcane to the sugar mills and the sugar industry is expected to report a sharp rise sugar production during the sugar year 2010-11.

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Categories: Sugar
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