Sugar prices continued their downward journey on higher selling pressure upper level and bearish sentiments due to month end. On Monday prices at Vashi market decline by Rs20 – Rs 30 for S –grade and Rs 10 – Rs 15 for M-grade in spot while naka rates drop by Rs 10 – Rs 20. Improve selling pressure of millers extended lose by Rs10 – Rs 15 in tender rates. As local demand was need based moral remain weak in physical and futures market said wholesalers.
Mr. Jagdish Rawal a Vashi based wholesaler said in physical market due to month end local demand is normal while supply from mills are expected to rise. Being a top producer of sugar Maharashtra’s mills have to sell allotted higher free sale quota of the month before due date and in absence of neighboring states buying in the state millers have to concentrate on local markets. So the local markets are facing over supply position recently. For millers only five days remain to finish current month’s free sale quota selling pressure is expected to rise further on them.
Mr. Rawal further added that neighboring states buying especially Gujarat, Rajasthan, Madhya Pradesh, Orissa is very poor and is lacking since long in Maharashtra forcing producers to depend on local markets. In futures market range bound volatility and bearish sentiment weigh on physical market. From next week with the start of the new month physical demand may improve and prices may stabilise with small decline.
Government has released additional 6.66 lakh tonnes free sale quota in two tranche (for August) over and above the free sale quota of 45 lakh tonnes declared for July – September quarters for which producers are directed to sale 70 % of the quota means 31.50 lakh tones till August end. As per trader total about 20 lakh tonnes of sugar is expected in August in domestic markets.
Meanwhile as per Kingsman, head of a Lausanne, Switzerland-based consultancy, sugar output in India, the biggest producer behind Brazil, is expected to be 250 lakh tonnes in the new season beginning in October, down from 260 lakh tonnes after a drought has hit the cane crop in some parts of the country. Output will still be higher than the domestic consumption of about 220 lakh tonnes annually. India will have the potential to export 20 lakh tonnes next year, but because of political implications and risks of lower production, our assumption is that there will be exports of only 10 lakh from March, when the market will have a clear idea about production.
Brazilian sugar mills pumped out 30 lakh tonnes of sugar in the first half of August thanks to dry weather, upping output by 14 percent from a year ago milling association Unica said last Thursday. On Friday sugar October -12 futures closed higher by $ 2.30 to $549.40 ($547.10) and December -12 futures rose by $1.50 to $547.10 ($545.60) per ton.
In Vashi market arrivals were higher at 57 - 58 truck loads (Each of 100 bags) and local dispatches were about 54-55 loads. On Saturday about 11 – 12 mills offered tenders and sold more than 40,000 – 45,000 bags (Each of 100 kgs) to local traders in the range of Rs. 3,340-3,400 (Rs 3,350-3,400) for S-grade and Rs 3,440-3,500 (Rs 3,450-3,500) for M-grade.
Bombay Sugar Merchants Association's spot rates: S-grade Rs 3,462-3,525 (Rs 3,482-3,572) and M-grade Rs 3,531- 3,671 (Rs 3,546- 3,682). Naka delivery rates: S-grade Rs 3,410 -3,450 (Rs 3,430-3,460) and M-grade Rs 3,510-3,620 (Rs 3,520-3,630).