NEW DELHI – Prices of medium-grade sugar fell in all the wholesale markets of the country today because of higher monthly sales quota, traders said.

The government fixed December sales quota for mills at 2.15 mln tn, while in November it was 2.05 mln tn.

In Delhi, prices fell 30 rupees per 100 kg, while in Muzaffarnagar it declined by 40 rupees. In Mumbai and Kolhapur, prices were down by 5 rupees and 20 rupees, respectively.

"Demand has taken a hit as quota for Uttar Pradesh alone is 25% higher than the previous month, while in Maharashtra and Gujarat, quota is less, so prices may firm up here later," said Vijay Kapoor, an official at Muzaffarnagar-based Anshika Sugars.

According to sources, the quota for December was hiked to provide liquidity in the ongoing crushing season to pay farmers' dues.

Prices are also on the lower side due to the ongoing crushing season. In Maharashtra, of the 130 mills that have been issued crushing licences, 50 mills are currently crushing cane, state's Sugar Commissioner Shekhar Gaikwad said.

Most cooperative mills are unable to start crushing operations for the season as Maharashtra State Cooperative Bank has denied loans to sugar mills due to their negative net worth and net disposable resources, Gaikwad said.

On ICE Futures US, futures contracts fell because investors booked profits after prices hit a nine-month high of 13.01 cents per pound on Friday. At 1815 IST, the March contract of raw sugar was at 12.91 cents a pound, down 0.2% from the previous close.

However, international prices are seen averaging higher at 13.5 cents a pound in the short term because drought in Asia and excessively cold and wet weather in the US and Mexico led to low harvest, and also as mills in Brazil are diverting more cane towards ethanol than the sweetener, Fitch Solutions said in a report.

Low prices of sugar and higher fuel prices in Brazil pushed up prices of ethanol, encouraging mills to produce the bio-fuel more. 

"…the only counter is that the amount of growth is not accelerating like it used to," Sucden Financial said in a report.

Following are today's ex-mill prices of medium-grade sugar in rupees per 100 kg, at key wholesale markets, and the change from the previous close: