They said prices have softened 1.5-2% in the last three weeks alone despite the support from exports as several mills continued to supply sugar above their monthly allocated quota.
Traders said they do not see prices recovering before the end of cane crushing operations in April.
“Sugar prices have declined by Rs60-80/quintal ex-mill during the last few weeks as the market seems to be oversupplied,” said Jaydeep Patil, managing director of Dr DY Patil Cooperative Sugar Mill in Kolhapur, Maharashtra.
The central government fixes a sale quota for sugar mills every month to check excess supply and the resultant fall in prices, which had earlier led to delays in payment of cane dues to farmers.
“Many sugar mills are selling sugar much above their monthly quota for various reasons,” a trader from Maharashtra said on the condition of anonymity. “Some have been servicing loans at exorbitant interest rates, while some mills do not want to carry forward huge stocks after the crushing season is over.”
Although sugar prices tend to remain subdued while the cane crushing operations are underway, the industry thinks the extent of downward movement in prices is more than expected. “When compared to the price levels during Diwali, sugar is selling cheaper by Rs 4/kg ex-mill,” said AbjijitGhorpade, a Maharashtra-based sugar broker.
Rajendra Yadav, managing director at Someshwar Cooperative Sugar Mill in Baramati, Maharashtra, said the price of S30 grade sugar has fallen to Rs3,220/quintal from Rs 3,280/quintal in mid-December. “We are not able to understand why the domestic prices are subdued. Lower demand has affected our domestic sales. We could not sell 40% of the December quota, while close to 50% of the January quota is also likely to remain unsold,” he said.
According to industry insiders, the slower pace of exports and allocation of extra quota for the domestic market in lieu of the export quota swapped by some sugar mills are some of the other possible reasons for a sluggish sugar demand.
According to trade body All India Sugar Traders Association (AISTA), sugar mills have so far dispatched 2.295 million tonnes of sugar out of the 6 million tonnes export quota allocated by the central government. Of this, more than a quarter of the sugar has been dispatched to African countries.
“We have contracted for the export of 55 lakh tonnes of sugar, of which 22.95 lakh tonnes of sugar has been dispatched,” said AISTA.
