Sugar prices to remain under check on stock limits, imports and higher production forecast for next year: Angel Broking

Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Commodities Broking):

"Sugar Futures have declined from its March highs on sufficient availability of sugar in the physical market due to implementation of stock limits for the mills and traders by the government steps couple with enough production in the country particularly in the state of Uttar Pradesh.

The Sugar futures on National Commodities and Derivative Exchange (NCDEX), the prices have hit its highest levels for the year in March and declined about 5.7 per cent to Rs. 3,725 per quintal. The sugar futures touch Rs. 3,953 per quintal in March 20.

Various research agencies and market participants have forecast lower sugar production for the second consecutive year due to drought during the two previous years 2014/15 and 2015/16. The country's sugar output is estimated to fall for the second consecutive year to around 20 million tonnes (mt) in 2016-17 season (Oct-Sep), much lower than the annual demand of 24-25 mt.

However, to increase the sugar availability government allowed duty-free import of raw sugar up to 5 lakh tonne, till June 2017. Moreover, government extends curbs on holding of sugar stocks by six months for the sugar dealers and traders. Currently, there is a stock limit of 500 tonnes and turnover limit of 30 days for sugar traders in the country other than those in West Bengal.

The trade participation on NCDEX have been very sparse in last few weeks due to high margin requirement for the buy side and thus the NCDEX had cut special cash margin on sugar for the buy side by 10% to 25% from today.

Sugar prices may stabilize in the coming months as government may imports more sugar into the country this season. According to US Department of Agriculture's bureau in New Delhi, sugar production in 2017/18 is forecast to bounce back by 18% to 25.8 mt. The consumption forecast is higher at 26 mt, thus India may not able to export but there will be a need for about 500,000 tonnes of imports which may keep the prices under check."

Source : Equity Bulls

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