Maharashtra is the 2nd largest producer of sugar, which hit a 7 year high quintal of Rs. 4,020 on Thursday as there was a weak supply and strong demand in the wholesale market.
This season, the production of sugar is expected to go down 40 per cent to five million tons in contradiction of prediction of 6.27 million tons.
Sugarcane output hit high with a good monsoon in Ahmednagar, Aurangabad, Nanded and Amravati after 2 years of drought-like subsequent situation.
Some of the sugar mills, which were not impacted by the droughts, are in Sangli, Pune, Kolhapur and Satara. These mills are now crushing sugar at almost parallel heights like the last year.
There are almost 170 sugar mills in Maharashtra, but currently there are only 147 sugar mills, which have started with their operations. The other 32 mills have stopped their production due to the increasing production costs and cane shortage.
Last year, in the same period, the state had produced 2.52 million tons of sugar as against 3.37 million tons as of December 31. For the first time in seven years, the output of sugar this season may drop below consumption levels, though there is high expectation of production of sugar in Uttar Pradesh. The annual demand for sugar in India is 25 million ton; however, it seems like the production of sugar this season might be just 22.5 million ton. This year in India, the supply of sugar is very less when compared to the demand.
The country will meet the local demand with the help of ample carry-forward stocks. Research Analyst, Karvy Comtrade says that many stockiest have already offloaded their catalogue after the imposition of the stock limit previous year by the government and they would also not help as the prices are globally firm and for lowering the import duty. He further added – “With prices firming up stockists are very cautious and are not building up inventory expecting government to impose stock limits again”.
He also added – “There are unconfirmed news that government may ban futures trading in sugar to cool down spot prices but that will not have much impact as the fundamentals are pushing up prices”
All the sugar mills, which are under debt, have preferred to shut their mills rather than investing again on buying raw materials. By 59%, cane prices have risen over the last 5 years. Due to this, the overall production has increased along with the cost significantly.
The centers have kept a close look and also warned the sellers about the retail sugar prices not going above Rs.40 per Kg. The government also might take some strict actions as the UP elections are just around the corner. Due to lower output expected in Thailand and Brazil, the sugar prices have gone up globally too.