Sugar Futures may remain sideways: Angel Commodities

Angel Commodities has come out with its report on Sugar. The research firm says Sugar Futures may remain sideways as hike in cane price and thereby increase in sugar production cost may force government to take some measures to increase sugar prices.

Sugar futures continued with its downward trend for the seventh consecutive session on account of higher supplies in the domestic markets. Prices touched an intraday low of Rs 3097 per qtl and again recovered to settle at Rs 3141 after the announcement of cane support price by the central government.  India has fixed FRP (Fair and Remunerative Price),the price sugar mills must pay to cane growers at 210 rupees per 100 kg in the 2013/14 year, compared to current year’s 170 per qtl. Though the federal government revises the cane floor price every year, some state governments invariably raise the rate to woo farmers, a large political constituency.  Higher floor price increases the cost of production as the raw material cost constitute the major part of cost of production of sugar. This should actually increase the prices of sugar.

Outlook:

Sugar futures may remain sideways as hike in cane price and thereby increase in sugar production cost may force government to take some measures to increase sugar prices. This would negate the effect of huge supplies in the domestic markets.  Fundamentals remain weak for the sugar markets with supplies exceeding the domestic consumption. Also exports remain unviable amid weak international markets.

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