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Attention, sweet tooth: Sugar prices to remain high over weak production

business Updated: Jul 26, 2016 10:56 IST
HT Correspondent
HT Correspondent
Hindustan Times
Sugar prices

Sugar production is typically calculated from July to June.(HT File Photo)

If you have a sweet tooth get ready to pay more for your daily sugar fix. Sugar prices, which have risen in recent months, are expected to remain firm due to a drop in domestic sugar supplies.

Sugar prices have already surged to Rs 35,000 a tonne in July from Rs 34,000 per tonne in June, as the production of the commodity fell 11%; output was down to 25.2 million tonnes in 2016. Sugar production is typically calculated from July to June.

“We expect sugar prices to remain firm for the next 3-4 quarters given that the sugar production is likely to decline further to 23-24 million tonnes in the sugar year 2017 because of a decline in the availability of cane in Maharashtra and Karnataka,” Sabyasachi Majumdar, senior vice-president at ICRA, said.

According to preliminary estimates of Indian Sugar Mills Association, India’s sugar production in 2016-17 is likely to decline 7.3% to 23.26 million tonnes. The total sugar acreage this year is expected to be 5.5% lower at 49.91 lakh hectares.

The lower production comes on the back of two years of consecutive drought. Although the monsoon has improved this year, its effect will only be visible next year, analysts say.

Last month, the government imposed a 20% export duty on sugar to keep prices under check. This may discourage additional exports of sugar this year and thus help curb future price hikes, but in the near-term, it’s unlikely to have a major impact on prices.

“Currently, domestic sugar realisations are already high as compared to the current export realisations, even without the impact of the export duty, thus it is unlikely that domestic sugar mills would have been exporting any significant quantities of sugar even without this additional duty,” ICRA’s Majumdar said.

Globally too prices remained firm due to unfavourable weather conditions in Brazil, the largest producer and exporter. Prices touched $530 per tonne in June from $480 per million tonne in May.

The surge reflects less positive production prospects in Brazil, following heavy rains, which hampered harvesting operations and affected sugar yields, ICRA added.