The downward revision of sugar production by 7.8 per cent to 26 million tonne in this sugar season (SS) along with the expected exports is likely to boost sugar prices in the near term, according to a report.
Domestic sugar production estimates for SY2020 are revised downwards by 7.8 per cent to 26 million tonne from the earlier preliminary estimate of 28.2 million tonne, rating agency Icra said in a report.
This along with the expected exports of 3.5 million tonne in SY2020 is likely to improve the demand-supply situation in the domestic market, therefore, supporting the sugar prices in the near term, it added.
"We expect the closing sugar stocks for SY2020 at around 10.0-10.5 million tonne post downward revision of the sugar production estimate as against 12-12.5 million tonne earlier. Hence, the domestic demand-supply situation would relatively be better, supporting the sugar prices in the near term, which is currently hovering around Rs 33-34 per kg," Icra Ratings senior vice president Sabyasachi Majumdar said.
Further, he said, the fair and remunerative price (FRP) of sugarcane is fixed at Rs 275 per quintal in SY2020, which is the same as that in the previous year.
"This non-increase in FRP sugarcane price is a saving grace for the sugar industry in the face of the supply-induced pressures," he added.
While the cane availability in Maharashtra and Karnataka was adversely impacted in SY2020 due to drought last year, heavy rainfall and water logging during the current year (AugustSeptember 2019) has further adversely impacted the cane crop in few regions of Maharashtra and north Karnataka, the report said.
In Maharashtra and Karnataka, the production is likely to decline by 42 per cent year-on-year and 28 per cent to 6.2 million tonne and 3.2 million tonne, respectively.
The production in Uttar Pradesh is likely to remain healthy in SY2020 at 12 million tonne, similar to that of the previous year.
Icra expects sugar consumption to increase to 26.7 million tonne in SY2020 and the consumption is likely to marginally outstrip production by around 0.7 million tonne.