Is the sugar industry getting back its sweetness?

Earlier this year, global sugar prices hit a three-decade high only to fall back by nearly 50% (to a one-year low) on the estimations that Indian sugar harvest would beat expectations.

Experts, however, are a little optimistic now about the sector. In an interview to CNBC-TV18, Sudakshina Unnikrishnan of Barclays Capital said that bulk of the bearish news in the sugar industry is behind us. According to her there is a modest recovery in sugar demand from the Asian countries.

“We have seen modest amount of import tenders coming back. Demand is back again primarily in the Asian countries, coupled with US, but we have not really seen a big rush of buying. Buyers are still quite cautious. They are expecting a big surge in global prices in coming months. They believe that there could be further potential downside from current prices," she said. 

As the largest consumer of sugar and second largest producer (after Brazil), the presence of Indian demand or supply in the global market is a significant driver of the price.

Going forward she expects that there will a modest surplus of sugar in SY11.

Meanwhile, the sugar industry is looking forward to deregulation this year. This is the first year sugar industry will have a balance going into the next year. This means that a balance will be maintained between production and consumption of sugar.

Rana Inder Pratap Singh, MD, Rana Sugars believes that the government policy should protect the domestic sugar industry. He said that 30-40% import duty is expected to be imposed on white sugar while levy sugar quota is likely to be reduced from the current level of 20%.