Monthly Prices Movement

  • Sugar prices in the major markets witnessed a mixed trend throughout the month as the production is expected to be lower and demand is high due to the upcoming festival season.

  • Wholesale prices Sugar surged over 32% Year-on-Year and was one of the major culprits behind a sharp rise in food inflation by 11.82% in July.

  • In Mumbai, Sugar is retailing at Rs. 41 per kg, and the prices have gone up by Re.1 in the past three months, mostly due to inadequate supplies.

Ground Report

  • Drought in the main Sugarcane growing areas is likely to hit India's Sugar production in 2016-17. But the weather which is turning favorable for Sugar cane crop in Uttar Pradesh and Maharashtra is likely to ease the concern over supply deficit for upcoming season.

  • International Sugar Organization (ISO) has estimated Sugar production in to a multi-year low of 24.5 million tonnes for Sugar season 2016-17 (September-October).

  • Agriculture ministry of India's data showed that Sugarcane acreage of the country is at 4.555 million hectares as on 26 August 2016.

  • Production of sugarcane in India is estimated at 352.16 million tones, is lower by 10.17 million tonnes than its production during 2014-15, according to the fourth advanced estimates.

  • Maharashtra's Sugar production is likely to fall to five year low and reach 5.5 million tonnes (MT) due to drought and crop diversification across Marathwada and western parts of the state. The current production estimate is at 40% lower than the 8.4 MT last season.

  • During the current season Uttar Pradesh is estimated to produce 7.5 MT of Sugar in 2016-17 which is higher than the previous year and Karnataka Sugar production is likely to fall to 3.2 MT from 4 MT in 2015-16.

  • Excess rainfall in major Sugar growing regions also likely to support the better yield prospects for upcoming season in the country.

  • Ministry of consumer affairs, food & public distribution said India has enough sugar to meet the estimated domestic consumption of 26 million tonnes for 2016-17 Sugar season as there is opening balance of 7.3 million tonnes and production is estimated at 23.3 million tonnes.

Policies

  • The government of India has asked the Securities and Exchange Board of India (Sebi) to ban sugar futures trading as there is likely to be a shortfall of the commodity.

  • India has decided to extend production subsidy to Sugar mills to achieve expected performance in respect of export of sugar and supply of ethanol.

  • Food ministry of India has proposed to slap stock limits on Sugar millers to tame Sugar price hikes ahead of festive season in the country.

  • Indonesian government has given instructions to build more modern Sugar mills and open up farmland to plant more Sugarcane to increase its Sugar production in coming years and end Indonesia's Sugar import by 2020.

Global

  • Global Sugar deficit of 5.5 million tonnes is expected by in the next Sugar even though there will be improved production in Europe and Brazil.

  • Chinese Sugar imports declined drastically by 13.4 per cent to 420,000 metric tons during July this year, according to customs data.

  • Chinese custom data showed that total Sugar imports advanced by 3.5% to 1.759 million tons during the first seven months of this year, against 1.697 million tons a year early.

  • Conab forecast total Brazilian Sugar production in the current season at 39.96 million tonnes, up from 33.49 million tonnes in the previous season.

  • The US Department of Agriculture increased its estimate of domestic Sugar production in 2016/17 by a massive 247,901 short tons, raw value, to 9.208 million.

  • Sugar stocks of Brazil’s Center-South region, the largest Sugarcane producer in the world, were up 7% on year as on August 1. the stocks are now at 6.45 million metric tonnes, according to the agriculture ministry data.

  • Brazil's Sugar output in the first four months of the season (April-July) totaled 16.9 million mt, up 26% year on year, according to UNICA.

  • As per foreign trade ministry data, Brazil's Sugar exports during January-July were up 22% on the year at 15.4 million mt.

  • Ethanol imports of Brazil increased 46% from the previous month and reached nearly 55 million liters in July which is a monthly record, according to Secretariat of foreign trade, or SECEX data.

  • Brazil's Ethanol imports is expected to rise in August and reach 84.70 million litres, higher than the imports in July which was at 72.66 million litres.

Outlook

  • The effects of drought in parts of the country over the past two years are set to impact prices of Sugar and confectionery items, with shortfall in Sugar production in India causing a demand-supply gap.

  • Since mid-April, worldwide prices of raw Sugar have risen by 30 per cent as the market started factoring in potentially lower global Sugar output in this year.

  • With subdued production expected during this year and sustained growth in demand, prices would remain high until the fourth quarter of 2016. In India, domestic prices have risen over the past 6 months and if users are slow to react, it could mean ballooning costs and a squeeze on profit margins.

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