Edelweiss Agri Research Monthly Sugar Report - June 2015 Domestic sugar prices continued its south ward movement as expected by Edelweiss Agri Research (EAR) June month report. Sentiment is likely to remain bearish in July as well due to domestic and global fundamentals. Edelweiss Agri Research expects 2015/16 Indian sugar production at 27.3 mmt versus 28.3 mmt of 14/15 Sugar production in Maharashtra, Uttar Pradesh and Karnataka is pegged at 10.2 mmt, 6.7 mmt and 4.8 mmt respectively Domestic consumption is estimated at 25 mmt versus 24.5 mmt of 14/15 Exports for the 2015/16 season are expected to be at 1.5 mmt versus anticipation of 0.75 mmt during 14/15 Medium term outlook to remain bearish in a range Domestic Supply - 2015/16: Edelweiss Agri Research (EAR) expects Sugarcane acreage to remain marginally higher by 0.4% on the back of good return as compared to competitive crops. Acreage in Uttar Pradesh is likely to increase by 1.2% on good return during last year as compared to Paddy. However, acreage in Maharashtra and Karnataka is likely to decrease marginally due to crop rotation on the back of replacement of 2nd year ratoon crop. Acreage in smaller states like Tamilnadu, Andhra and Telangana is likely to decrease on the back of other alternative crops. Acreage in Tamilnadu is likely to shift towards Turmeric and Paddy and in Andhra and Telangana towards Maize/Soybean/Paddy. Cane payment issues in these states have led to decrease in acreage. Price outlook – July, 2015: EAR expects prices to trade in a narrow range till mid July on higher Ramadan demand. Prices likely to trade in the range of Rs 2050 – 2,150 per quintal at Kolhapur market for M-grade. Prices are likely to trade towards Rs 2,000 per quintal from SH – July on excess supply and lower demand. Cane arrears are at the tune of Rs 23,000 Crore for the current season. On the back of non clearance of cane payment in the Karnataka state, District Commissioners has seized the sugar stocks lying with the mills. Further, Uttar Pradesh High Court has directed mills to clear 75% cane bills by Mid July. This may pressurize millers to liquidate at discounted price. Carryover stocks for the next season are at 10.1 mmt higher by 4 to 4.5 mmt of normal formative limit set by Central Govt to meet demand during the off season. Good showers during June, 2015 are hinting for another excess supply year than domestic consumption which would keep lid on the sugar prices.