Emerging festive demand and positive government measures kept sugar prices firm during the week starting August 27. The week saw the Group of Ministers clearing a restructuring package, which includes more time to mills to clear their dues, extension of moratorium on outstanding loans, and conversion of certain outstanding loans into term loans. The government also cleared the proposal to make 5 per cent ethanol doping in petrol mandatory nationwide. Meanwhile, the UP government has sought an interest-free loan of Rs 2,000 crore for sugar mills to enable them to repay cane arrears to farmers. However, sugar prices are expected to fall further in the long term as oversupply is expected to persist till 2009. The global market is headed for a surplus of 10.8 million tonnes in 2007–08, with record output of 169.6 million tonnes. Indian production in 2007-08 is seen at 33.15 million tonnes, up 8 per cent on year, making India the world’s biggest sugar producer. Exports have crossed 2 million tonnes in the year to September 2007, while 2007–08 exports are forecast at 3.5 million tonnes.
PRICE DRIVERS:
· Festive demand picks up in North India
· Several govt sops for sugar sector to increase exports
· Another bumper sugar year ahead (30 MMT) after bumper 2006-07
· Huge glut continues in global sugar markets
· Talk of immediate 5% ethanol doping in petrol, 10% by Oct 2008
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