Trends
Spot Sugar remained sluggish on Thursday amid reports that the government might release additional quota of sugar to check the rising prices.
Sugar futures witnessed profit booking during the yesterday’s trading session and thus settled lower at Rs. 1773 per qtl.
The Central government fixed the August sugar sale quota at nine lakh tons, down from 12 lakh tons in July.
ICE October world sugar settled down 40 points at 13.79 cents a pound, with March 2009 losing 47 points to 14.92 cents.
India's sugar output for the upcoming crop year that starts in October this year is projected at around 26 million tons, compared with around 27.5 million tons this crop year and more than 30 million tons in the 2006-07 crop years.
Fundamental Analysis
Lower than expected Sugar sale quota for the month of August, supported Sugar prices to remain firm during the initial days of the week. However, prices witnessed profit booking on the reports that the government might release additional quota to curb the rising prices.
If the additional quota is released within next two days, the rise in sugar prices will be paused. Otherwise, estimates of Lower production coupled with lower supply in the coming months may continue the rally.
On the International fronts Brazil is converting more of its Sugarcane towards Ethanol and thus Sugar production would be lower in Brazil in the current crop year.
Lower production in the 2 major Sugar producing countries, i.e. India and Brazil may keep Sugar prices firm in the medium term as well.
Technical Analysis Sugar prices (NCDEX Sept 08 Contract) close at Rs. 1773 per quintal on Wednesday, against the previous day close of Rs. 1803.
Prices closed above its 5 Days SMA, 20 days and 65 days SMA indicating an up trend.
Sugar futures are likely to remain sideways for the intraday.
Outlook Sugar prices might remain range bound with slightly bearish sentiments on the report that government might release additional quota to curb rising prices. However, in the short term, we expect prices to remain firm on rising demand ahead of festival season. On the international fronts, Brazil is likely to convert more than 65 % of its cane production towards Ethanol, thereby creating a global Sugar shortage in the medium to long term. This would support the international Sugar prices to remain firm. In the medium term, Indian Sugar futures are likely to remain bullish on Lower crop in Global as well Indian markets.
Analysis Courtesy: Angel commodities
