Export decision boosts sugar prices.

Sugar prices in the spot markets jumped by Rs 30 to Rs 50 per quintal on Thursday, a day after the government allowed exports of 5,00,000 tonne of sugar under the open general licence (OGL).

However, most analysts and industry observers believe that it is just a temporary reaction to the announcement and prices would stabilise soon as crushing of cane is going on in full swing and stock position is also comfortable.

Shares of major sugar companies also gained because of the export announcement. Shares of Bajaj Hindustan Ltd, the country's biggest sugar producer, gained 2.3% to Rs 110.45, while Balrampur, the second biggest, surged 2.4% to Rs 79.75 at close, the highest level since December 6. Shree Renuka Sugars Ltd., the nation's biggest refiner, jumped 5% to Rs 89.7. The government on Wednesday allowed exports of 5,00,000 tonne of the sweetener to allow millers take benefit of high global prices.

It also increased the levy sugar price (the price at which government purchases sugar from mills for meeting its PDS obligations) to Rs 1,847.05 per quintal, up 5.09% from last year's Rs 1,757.50 per quintal, which would further improve their liquidity position. Sources said at present in international markets, Indian sugar is expected to fetch around Rs 3,100-3,200 (free-on-board) per quintal in the international markets, while ex-factory domestic prices are around Rs 2,800 per quintal.

Figures sourced from National Commodity and Derivatives Exchange (NCDEX) show that spot price of M-grade sugar in Delhi rose from Rs 2,990 per quintal on Thursday to around Rs 3,025 per quintal, while the price of S-grade sugar in Vashi was quoted at around Rs 2,950.65 per quintal, almost Rs 45 more than the Wednesday price, and in Kolkata, the same quality of sugar was quoted at Rs 3,022.50 per quintal, Rs 22 more from Wednesday.

Meanwhile, the government on Thursday indicated that it might review its export policy in January. "Procedures for sales outside the country will be completed in 10 days and a review of export plans will take place at the end of next month," food and agriculture minister Sharad Pawar said.

Rising supplies may help cool sugar prices that reached the highest level in almost 30 years last month in New York on concern that shipments from Brazil, the biggest producer, and India, may be too low to meet demand.

A Bloomberg report shows that raw-sugar for March fell as much as 0.6% to 30.94 cents a pound on ICE Futures US in New York on Thursday, while white sugar for March delivery gained as much as 0.4% to $770.80 a tonne in London.

Official projections have pegged sugar output this year at 24.5 million tonne while industry is sticking to its outlook of 25.5 million tonne against a local consumption demand of only 23 million tonne.

Source : FinancialExpress