The carryover stock of cane for the new sugar year (it began on October 1) is about four million tonnes. The market expects a rise in sugar output of 24 per cent this year.
"Mills in Maharashtra and UP are offering discounts to consumers for delivery in the second week of November. Hence, sugar prices are likely to decline with arrival of new-season crop," said Praful Vithalani, chairman, All India Sugar Trade Association.
Mills in UP are offering Rs 3,650-3,680 a quintal for delivery in the second week of November; those in Maharashtra for Rs 3,400-3,450 a qtl.
"Sugar's price would not decline abnormally. We estimate a marginal increase in cane SAP (the government-set minimum) in UP, which would keep cost of production elevated. To get farmers' cane arrears cleared, mills' realisation has to be higher than the cost of production," said a senior industry official.
Mills in UP have decided to start crushing without clarity on the SAP; the government announcement is expected soon. An increase in SAP will partly offset their expected increase in sugar recovery with a new cane variety.
Indian Sugar Mills Association has forecast production at 25.1 million tonnes for the current crushing season (October 2017 to September 2018), a sharp increase from 20.3 mt the previous year.