Sugar skids as govt extends ban on exports

MUMBAI: The stern message against the possible hoarding of sugar stocks through a ban on exports had an immediate effect with the prices of the sweetener coming down by Rs 100/quintal in major markets.

The ban, which exempts preferential quota of sugar exports to the US and EU, would be applicable till March 31, ‘07.

In the futures market too, sugar prices have crashed by over Rs 90 a quintal from Rs 1,898 for July contract and to Rs 1,805 a quintal for December, official sources said.

Sugar exports to the US and EU would be permitted only through the Indian Sugar Exim Corporation up to a quantitative ceiling notified by directorate general of foreign trade (DGFT).

The notification allows for shipment of sugar (for exports) against the contracts for which letters of credit were opened before June 22 this year, when the Cabinet had decided to ban exports of the sweetener.

According to Kotak Commodity Services (Kotak CSL), the move will result in restriction of export demand for the commodity, leading to a situation of relative oversupply in the domestic market. This will push sugar prices within India down while inflating prices in international market, feels Kotak CSL.

“The international sugar situation becomes fairly bullish in light of the restricted supply from the EU following reforms in their pricing policy. Also, globally, alternative demands on sugar for ethanol production and high energy prices are limiting the supply of sugar for consumption,” says Kotak CSL.

According to food ministry officials, however, the ban may not have much impact on exports as shipments are very low during this period of the year due to rains in the main sugar growing state of Maharashtra.