Sugar Declines on Production Estimates .

Sugar spot prices and futures declined 0.19% and 0.34% respectively on Wednesday with sugarcane crushing gathering pace in major producing regions. Sugar output is up 15% till January 15, 2011 according to the official of the food ministry.

According to the agri ministry, Sugar exports have not been put on hold and mills are asked to fulfill the necessary conditions by January 31. 5 lakh tonnes of Sugar exports are allowed under Open General License (OGL).

International markets settled lower at $771.6/tonne. Uncertainty with regards to Indian exports due to inflationary pressure is prompting the international markets to adopt wait and watch policy.

Production
Indian Sugar production is estimated at 24.525 million tonnes in the current year 201011, up by 30% compared to last year.
As on 13th January 2011, 158 sugar factories in Maharashtra crushed 295 lakh tonne sugarcane and produced 30 lakh tonne sugar with 10.31% recovery.

Sugar output in Karnataka is up by 11% at 9.77 lakh tonnes in the first three months of 201011 season that began on 1st October, 2010 (State Farm Department) .

Trade
India is normally a net sugar exporter, but had to import in the previous two seasons due to fall in output. However, the government during the last month had permitted exports under Open General License (OGL) to the extent of lakh tonnes and thus mills are asked to fulfill the necessary obligations by January 31.

Indian government has imposed 60% duty on sugar imports. Total raw sugar imports in 201011 are expected to be lower at around 1.2 million tonnes compared to 4.5 million tonnes in 200910.

Outlook
Sugar prices are expected to decline further in the intraday due to sufficient supplies in the domestic markets.

Currently, Sugar prices at Kolhapur are trading around Rs. 2800 per qtl levels. We expect Spot prices at Kolhapur to trade in the range of Rs. 2750 and Rs. 3000 per qtl levels for the rest of the month.

Ongoing crushing may put some pressure on the prices. However, any significant decline in the prices due to crushing may be treated as a good buying opportunity for the medium term.

In the medium to long term domestic Sugar price movement would be dependent on the permissible sugar exports from the country. Domestic sugar could gain if exports are allowed given the high sugar prices prevailing in the global markets.

Source : commodityonline.com