Export curbs on cards as sugar prices go north

Sugar prices have been steadily firming up, rising to nearly 15% at the retail-end since a month ago, and quickening to a year's high in wholesale markets.

Sugar prices have been steadily firming up, rising to nearly 15% at the retail-end since a month ago, and quickening to a year's high in wholesale markets. Higher demand and anticipation of weak rains reducing the output could be driving up prices, analysts said.

Industry representatives, however, said stocks were adequate and the rise may have to do with higher production costs.

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"We have adequate sugar stocks, and we do not expect a great shortfall," a spokesperson for the Indian Sugar Mills Association (ISMA) said. The Muslim holy month of Ramadan also contributed to an overall rise in global and domestic demand, with India currently positioning itself as a key player in exports.

Wholesale prices of medium-grained sugar (M-30) increased by Rs 100 per quintal (100 kg) on Monday, the sharpest rise in a year, while that of the slightly more expensive small-grained variety (S30) gained Rs 90.

The ISMA said it expects to witness a total output of nearly 26 million tonnes during 2011-12, while domestic demand hovers around 21-22 million tonnes. The industry body has projected output for the next cane-crop year, beginning October, to be around 25 million tonnes. However, food ministry has differed with industry estimates on stocks.

The government is considering allowing mills to release more sugar in the open market, and imposing export curbs to tame prices. Sugar is a tightly regulated commodity, with the government deciding how much mills can sell every month.

The prices of pulses and cereal have also been firming up, heightening concerns of a food inflation spiral. The monsoon, so far deficient by 19%, acts as strong check on inflation. Weak rains could crimp farm output, typically resulting in higher food prices. Already, prices of wheat and pulses have jumped 6% and 20% in June from a year ago.