Sugar ex-mill domestic prices have fallen in Maharashtra in recent days, raising concerns for the industry. Many industry insiders attribute the state's prices hovering at Rs 3,100-3,150/quintal to export saturation and the entry of unaccounted-for sugar into the market.
The 2022-23 cane crushing season began on a high note, with domestic ex-mill prices ranging from Rs 3,300 to Rs 3,400 per quintal. International raw sugar prices were above the psychological barrier of 20 cents per pound (roughly Rs 3,500-3.550/quintal). This season, the Centre reinstated the mill-based quota system for the export of 60 lakh tonnes of sugar.
Sugar mills have contracted for 55 lakh tonnes of sugar so far. This includes 14 lakh tonnes of export quota from Uttar Pradesh mills that were swapped with mills in Karnataka and Maharashtra. However, ex-mill domestic prices have since fallen to around Rs 3,100-3,150. According to mills in Maharashtra, this drop was unexpected and could be the result of unaccounted-for sugar entering the system.
Mills passing off C molasses (a byproduct of sugar factory processing) as B-heavy molasses (contains approximately 40% sugar content that is fermented by yeast during the ethanol conversion process) for the production of ethanol. When ethanol is produced from B-heavy molasses, less sugar is produced than when ethanol is produced from C molasses.
According to an insider, ex-mill prices will not fall unless excess sugar is added to the markets. The saturation of export markets is another reason for the price drop. Mills signed contracts for 55 lakh tonnes of exports, but only about 14 lakh tonnes of sugar had been shipped out as of the end of December.
Another 41 lakh tonnes of sugar must be shipped out until March, equating to around 15 lakh tonnes per month. Although the logistical backlog that has plagued the export markets has been alleviated, the industry will face challenges. Due to the exhaustion of exports, avenues prices are not expected to rise until March.
