sugar prices in India

India's sugar prices have gone up substantially over last fortnight. However this seems surprising but there are some logical reasons to justify these unexpected moves. But before that a brief on price changes from last week of December to till date:

North Ex-mill M Grade: 1360 ---> 1460 (+7.5%)
West Ex-mill M Grade: 1250 ---> 1360 (+8.8%)
South Ex-mill S Grade: 1220 ---> 1375 (+12.7%)

Well this move itself explains a bit about the recent hikes in the prices.

A) Pipe-line was empty: Delayed crushing in UP resulted in excess flow of sugar from Maharashtra and buyers were going hand to mouth. Untimed rains in TN and southern Andhra delayed crushing resulted in wiping of stocks at mill level.
B) Raw Sugar demand: India (Inexperienced Indian mills) has committed huge quantities of raw sugar exports this season, which they are producing at the cost of plantation white sugar. Most of Maharashtra and Southern mill used their 1st month’s capacities in producing raw sugar resulted in fresh white sugar deficit.
C) Increased Demand: Due to coming festivals like Pongal in south and Sakranti in north & west resulted in fresh demand in already deficient market, resulting in buying happening at even higher levels as well.
D) Production estimates: Well from 33 mmt to 30 mmt to 28 mmt to now 26.5 mmt. These are not official figure but are the figures going around in the market. India has produced about 6 mmt against 7.4 mmt during Oct-Dec last year.
E) International market: Not directly but to some extent rising international sugar prices have boosted sentiments at our home as well. Crude is hovering at $100, pushing world to consume more of bio-fuel, which may push brazil to use more cane for ethanol at the cost of sugar.

Uncertainty in the market gave birth to many rumours, ranging from huge drop in production to excess outflow of sugar through export, low carry over stock etc etc. . .

At the end of the day we all know that India has excess sugar from last year and we will produce more than what we consume this season as well so there is no fundamental reason as to why prices will just go northward. However these upswings are rather better opportunities to short sell on NCDEX may-June contract.