IGrain India Special Report- Sugar Market in Dilemma, Future Market Direction Remains Unclear
★ A major change in the way sugar is being traded has been observed following a government circular issued during the first week of October.
★ The government indicated that mills should sell sugar at around ₹4,500 per quintal and refined sugar at around ₹4,600 per quintal. Following this circular, trading practices across several segments of the sugar market appear to have changed.
★ According to market sources, some agents are reporting that they are receiving lower quantities of sugar from mills compared with earlier. Some agents are also selling only to traders who make advance payments or are known for making payments on time.
★ At the same time, several mills in the open market are not clearly disclosing how much sugar they have released for sale.
★ Based on available production, supply and demand estimates, sugar stocks with mills are considered adequate.
★ The government is releasing the sugar quota twice a month, while quota prices are also being increased. Despite this, a bullish sentiment continues to prevail in the market.
★ The key question is whether the current price rise is being driven by genuine demand and supply factors, or whether limited market information and certain trading practices are contributing to the bullish sentiment.
★ Under the current circumstances, the government should consider obtaining details of actual sugar sales from mills.
★ Information on how much sugar each mill has sold, the prices at which it was sold, and the stock remaining with mills should be made available in the public domain on a regular basis. This could improve transparency and help traders, agents, millers and other market participants understand the actual market situation.
★ If physical supplies and stocks are adequate, the creation of a bullish sentiment merely on the basis of limited transactions or unclear price information could become a concern for the entire market.
★ Margins in the sugar trade are already very limited. In such an environment, a lack of clarity regarding actual sales, traded prices and available stocks can create difficulties across the entire sugar industry.
★ At present, production and stocks alone are not determining the direction of sugar prices. Government policy, the method of selling sugar, the availability of quota and transparency of market information are also playing an important role.
★ Going forward, it will be important to monitor how much sugar is actually being released by mills into the market, how much is being sold, and how much of the government-released quota is actually being absorbed by the market.
★ Until greater clarity emerges regarding mill sales and available stocks, uncertainty over sugar prices and the future direction of the market is likely to continue.
