Sugar prices in India hit record high amid festival demand, tight supplies
India’s sugar prices have reached a record high after rising 10% in a month, driven by tight supplies and strong festive demand. Prices are expected to remain firm until the new crushing season, boosting sugar companies’ earnings while increasing inflationary pressure.
Mumbai: Indian sugar prices have climbed 10% over the past month to a record high and are likely to stay firm for at least the next three months as limited supplies coincide with rising demand ahead of the festive season, traders and industry officials told Reuters.
The increase in sugar prices is expected to add pressure on retail inflation, which crossed the central bank’s target for the first time in 17 months in June. It could also prompt the government to introduce additional measures to contain prices after banning sugar exports and imposing stock limits last month.
The price rally is also expected to improve earnings for listed sugar companies, including Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars and Dalmia Bharat Sugar, market participants said.
Wholesale sugar prices in Kolhapur, one of India’s key sugar trading centres in Maharashtra, have risen nearly 10.2% over the past month to an all-time high of Rs 4,716 per 100 kg.
“Demand has started increasing ahead of the festive season, while sugar mills are releasing stocks gradually because they expect prices to rise further,” said Ashok Jain, president of the Bombay Sugar Merchants Association.
Sugar consumption in India generally increases between August and November during festivals such as Ganesh Chaturthi, Dussehra and Diwali, when demand for sweets and confectionery products rises.
Sugar stocks with mills at the start of the new marketing season on October 1 are expected to decline to around 3.5 million tonnes, the lowest level in more than 30 years. The drop follows lower production this season than annual consumption, along with exports of about 800,000 tonnes of sugar.
“Supply conditions are likely to improve only after mills begin crushing the new-season sugarcane crop in November. Until then, the market will depend on the current season’s output, which was not enough to meet demand,” a Mumbai-based trader said.
Large industrial buyers, including biscuit and confectionery manufacturers as well as soft drink and beverage companies, are increasing purchases ahead of the festive season. They are building inventories despite higher prices to avoid supply shortages during the peak demand period, the trader added.
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Source : ChiniMandi
