Despite a softening trend in global prices, domestic sugar continues to firm up on concerns over next year’s crop size. In recent weeks, global prices have softened on improving production in Brazil where rain had delayed the harvest.

Sugar futures on NCDEX jumped about 3 per cent on Wednesday on uncertainty over the 2012-13 crop, mainly in Maharashtra. The contracts for delivery on August 17 were up 2.87 per cent at Rs 3,450 a quintal, while the September 20 delivery was up 2.96 per cent at Rs 3,516. The futures for delivery on October 19, ended 3.06 per cent higher at Rs 3,540.

Spot prices were also up in the key markets of Muzafarnagar and Kolhapur on demand ahead of the festive season. Prices in Muzaffarnagar gained 8 per cent over the past fortnight, while in Kolhapur, the price of the sweetener has risen by 6.5 per cent. On Wednesday, sugar prices in Muzaffarnagar stood at Rs 3,653 a quintal, while in Kolhapur it was Rs 3,545.

“The fundamentals are positive and there is expectation that the next year’s crop will be lower,” a commodity analyst said. Also, the Empowered Group of Ministers, which met on Tuesday to review the drought situation, was undecided on imposing any curbs on futures trade, which aided the trend in futures rally.

However, millers expect prices to stabilise in about a month. “There will be more clarity in a month when monsoon ends,” said Director-General of Indian Sugar Mills Association (ISMA) Abinash Verma.

Also, the industry expects to close the current year with a balance of 6.5 million tonnes (mt), about 1 mt higher than last year. “Once the market realises the higher balance, prices would stabilise. The prevailing price is the right price for the industry to breakeven,” Abinash Verma said.

Production in the current 2011-12 season is estimated at 26 mt, while consumption is about 22 mt. The millers’ body has predicted that output for the 2012-13 season would be lower by 1 mt at 25 mt.

>vishwanath.kulkarni@thehindu.co.in

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