Wholesale sugar prices dip for now

Wholesale sugar prices have fallen 10 to 12 per cent in the past two to three days, the country's agriculture minister said, but analysts expect the dip, which will delay imports, to be temporary amid local supply shortages and a bullish global sugar market. The Indian government is struggling to contain inflation, which jumped to a one-year high of 7.3 per cent in December, driven by a near 20 per cent annual jump in food prices after the worst monsoon in 37 years damaged rice and cane fields last year. "There is a drop in wholesale prices of sugar.... Retail prices will start falling in 10-15 days," Agriculture Minister Sharad Pawar told reporters on Monday. He said wholesale sugar prices had fallen to Rs 37-38 (81-82 cents) per kg from Rs 42 rupees.

Industry officials said falling domestic prices made imports unviable in the short term. "Since the local market is coming down, mills are not importing sufficient quantities these days. There has been a drop in prices in the last 4-5 days," said Mukesh Kuvadia, secretary general of the Bombay Sugar Merchants Association. New York's March raw sugar contract, which hit a 29-year peak at 28.95 cents per lb on January 7, slipped 0.14 cent to settle at 27.62 cents per lb last Friday, but analysts said the market may soon touch a 30-year high.

Trade and industry officials say mills received 2.3 million tonnes of raw sugar and 225,000 tonnes of whites in the year to September, while in the first quarter of the new season that began on October 1, 1.8 million tonnes of raws and 371,076 tonnes of refined sugar were shipped in. The government allowed tax-free imports of raws and whites in early 2009 to overcome a shortage after output plunged 44 per cent to 14.7 million tonnes last year. Sugar deficits for two consecutive years in India, the world's top consumer, are a key contributor to the global rally.

NR Bhanumurthy, an economist at India's National Institute of Public Finance and Policy, said imports would be costly. "Even at the international level, the demand set prices are going up. So even if you are importing, you are not going to import at a lesser price," he said.

India's sugar prices may fall in the short term, but the commodity do not have a big weightage in the price index, Bhanumurthy said. In the keenly watched wholesale price index, sugar has 3.62 per cent of weightage unlike fuel and power, and chemicals, which have 14.23 and 11.93 per cent respectively. "In that sense, I do not really see it will have a big impact. It will not bring down inflation in a big way." The minister also said the current cold weather in northern India was beneficial for the winter-sown wheat and rapeseed crops.

Source: http://economictimes.indiatimes.com/markets/commodities/Wholesale-sugar-prices-dip-for-now/articleshow/5473209.cms