Sugar tumbles on ample stocks

Spot prices as well as futures of sugar ended 2.31% and 2.64% lower respectively w-w as domestic markets are flooded with huge stocks of levy Sugar and expectation of higher non- levy quota for the month of April 2011.
According to government official 1.7 million tonnes of nonlevy sugar for the month of April has been made available, little changed from 1.684 million tonnes released in March.
The quota includes 100,000 tonnes of unsold stocks from March 2011.(source: Factiva) However, the decline in the prices may be for short term. Overall, we expect prices to remain firm on export announcement along with the downward revision of UP’s and Maharastra Sugar output.
Also, reintroduction of 60% import duty which would make imports more expensive may support prices. Decision to increase the stockholding limit for a trader to 500 tonnes from 200 tonnes, to encourage procurement from sugar may also favor the bulls in the market.
London May white sugar futures settled higher by 0.55% whereas ICE Raw Sugar futures settled marginally lower by 0.37% on Thursday. 60% import duty on sugar likely from today With the country’s sugar production set to exceed domestic demand, the government is likely to reimpose 60 per cent import duty from today. In early 2009, import duty on sugar was abolished to boost domestic supply in view of a dip in production in the 2008-09 sugar year (October- September). Prior to that, the same stood at 60 per cent. The duty-free regime was valid till on Thursday.
500,000-tonne OGL sugar export gets Centre’s nod India, the world's top sugar consumer and the biggest producer behind Brazil, on Tuesday allowed unrestricted exports of 500,000 tonnes. However, absence of a formal notification from the government is keeping the millers and exporters worried.
Domestic Pricing, Production & Consumption
India has raised the price sugar mills must pay to purchase cane from farmers to 145 rupees ($3.20) per 100 kilograms in the next season that begins from Oct. 1, government sources said during the last week. In the current season to September, the cane purchase price had been fixed at 139.12 rupees per 100 kgs.
Sugar production in UP is expected far below the 7 million tonnes estimated at the beginning of the season. As on 22nd March, 2011, 5.51 million tonne sugar had been produced UP.
The ISO, in a quarterly update, projected a global surplus in October 2010 to September 2011 of just 196,000 tonnes, well down from the 1.29 million seen in the last update in November 2010.Global consumption in 2010-11 was revised up by 180,000 tonnes to 167.849 million tonnes.
Outlook
Sugar prices may trade sideways to down in the next 2-3 days as sufficient stocks at the domestic mandi may pressurize prices. No official notification with respect to exports is also underpinning the sentiments.
However, Sugar prices may gain sharply once the governments approve the applications for exports of Sugar. Also, increase in stock limits and reintroduction of 60% import duty on Sugar may provide further support to the prices.
Prices may gain by Rs. 100-150 per qtl in the coming weeks. In the medium term prices would depend on the permissible Sugar exports by India and the final estimates of Sugar output. Prices are expected to trade in the range of Rs. 2600– Rs. 2900 per qtl levels.

(Source: http://www.commodityonline.com/futures-trading/technical/Sugar-tumbles-on-ample-stocks-22972.html)