THE COVID-19 OUTBREAK is likely to have an adverse impact on sugar consumption, leading to a decline in prices by 3-4% in the near term, according to a report.
This is notwithstanding the decline indomestic sugarproductionalongwith the exports, which is likely to result in closingstocks correction to 10-10.5million tonne for sugar season SY 2020, from14.5milliontonne inSY2019,ratings agency Icra said in its report.
“The decline is mainly due to lower sugar production and higher sugar exports. However, if the government continues with the buffer stocks of 4 million tonne in next year too, the net available sugarbalance formarketwould be around 6-6.5 million tonne, which is closer to the normative sugar stock levels,” Icra Ratings senior vice president and Group Head Sabyasachi Majumdar said.
Domestic sugarproduction estimates for SY 2020 at 26.5 million tonne is lower by 19.5%year-on-year,Icra said. This is primarily due to the decline in cane availability in Maharashtra and Karnataka following the drought last yearandheavyrainfallandwaterlogging during the current year (August-September 2019), it added. Icra expects domestic sugar consumption of around 26 million tonne in SY2020.InSY2020, asofFebruary2020, the export contracts have beenmade for a quantity of over 3.5 million tonne, out of which about 2.2 million tonne are shipped. Considering that the exports are likely tobe around4.5-5.0milliontonne when compared to the governmentapproved 6 million tonne, the closing stocks would be around 10-10.5 million tonne. “The decline in domestic sugar production along with the monthly sugar release mechanism and creation of 4 million buffer stock has supported the sugarprices inthe recent past.The sugar prices remained range bound between `32-33 per kg during November 2019- February 2020,”Majumdar said.