Sugar prices in the physical market ruled flat while in the futures it dropped by Rs 23-28 a quintal on Thursday. This was due to the absence of any positive cues and higher free sale quota announced by the Centre.

The bearish trend will continue in sugar as the Government has declared ample quota for the next six months (April-September) at 104 lakh tonnes which is 7.50 lakh tonnes more than the same period last year.

In the Vashi physical market, spot rates for S-grade improved by Rs 10, while for M-grade it declined by Rs 10. Naka and mill tender rates ruled unchanged. The market is carrying over 120 truckloads of inventory currently.

In the absence of upcountry buying at mills level, millers are bound to offload the commodity in local markets. Hence, they are staying away from fresh buying.

A wholesaler said that being the end of the financial year and month-end time, local retail and semi-wholesale demand continued to be lower.

On the other hand, supply from mills is ample. Considering that the current prices are below production cost and parity prices are not expected to fall further, producers may hold back sales if prices fall further.

According to an observer, the production cost of sugar in Maharashtra is over Rs 3,200-3,300 a quintal and prices are already ruling below that level.

On the NCDEX, sugar April futures dropped by Rs 23 to Rs 2,892, May contracts declined by Rs 28 to Rs 2,938 and June was Rs 3,001 (Rs 3,021) till noon.

In Vashi market, arrivals were 64-65 truckloads (each of 100 bags) and local dispatches were 61-62 loads.

On Tuesday evening, about 10-12 mills offered tenders and sold 30,000-35,000 bags to local traders at Rs 2,930-2,970 (Rs 2,930-2,970) for S-grade and Rs 2,980-3,150 (Rs 2,980-3,150) for M-grade.

The Bombay Sugar Merchants Association's spot rates were: S-grade Rs 3,082 – Rs 3,181 (Rs 3,072– Rs 3,181) and M-grade Rs 3,181 - 3,361 (Rs 3,192- 3,361).

Naka delivery rates: S-grade Rs 3,040-3,060 (Rs 3,040-3,060) and M-grade Rs 3,100-3,220 (Rs 3,100-3,220).