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Sugar prices in domestic markets have started softening since the central government allowed the import of 1 million tonnes of raw sugar and tightened stockholding limits for bulk buyers.
According to spot market data maintained by the National Commodity and Derivatives Exchange (NCDEX), prices of medium-grade sugar in Maharashtra’s Kolhapur market have dropped from around ₹6,350 a quintal to ₹5,550 a quintal, a decline of around 12.59 per cent.
Meanwhile, prices in Muzaffarnagar remained steady at around ₹5,800 a quintal. The measures to curb prices were clearly showing some tangible impact on the ground for now.
However, how long prices will remain weak and how far they will fall will need to be watched closely.
Some traders said any decline below ₹5,000 a quintal might start hurting millers, particularly if it continues into the next crushing season, which begins in late October, as the production cost of sugar is around ₹4,200-4,300 a quintal.
Meanwhile, news agency Bloomberg reported on Wednesday that Indian refiners would divert 350,000 tonnes of sugar originally headed overseas to the domestic market after authorities cleared the move to ease a supply crunch, according to people familiar with the matter.
The processors could release the stockpiles to domestic buyers within a week, said the people, who asked not to be named because of the commercial sensitivity of the information. That would be enough to meet total demand in the world’s most populous country for almost five days and would help tame prices that surged to a record high last week.
The release of the stockpiles would provide near-term relief without the need for imports, the people said. While inbound shipments would still be required later, the supplies would help tame domestic prices until the arrival of sugar from Brazil, they said.
Sugar demand in India typically peaks during the festival season, which begins in late August and runs through January, as people consume more traditional sweets and processed foods.
The country’s move to allow imports has put upward pressure on global prices, although this has eased in recent sessions on expectations that it will not need to import as much as anticipated.
Duty-free sugar imports may total between 300,000 and 600,000 tonnes by the end of October, according to estimates from five traders, analysts and millers surveyed by Bloomberg.
That is below the 1-million-tonne quota approved by the government, as softening domestic prices reduce the incentive for millers and refiners to increase shipments.
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