Sugar Price Prediction Up 18 percent in 2012, Sugar Outlook Profitable

Sugar price prediction in 2012 raise according to Commission for Agricultural Costs and Prices (CACP). The India government to raise the Fair and Remunerative Price (FRP) for cane by 18% to Rs 171 per quintal from October 2012.



Sugar outlook 2012 is still profitable. Factoring the five per cent increase in sugar cane prices during the coming UP state elections in April-May 2012, the sugar segment is expected to be profitable, driven by tight balance.

The FRP for sugar cane for the upcoming season from October onwards would be Rs 145 per quintal the price hike would come in to force from October 2012.

FRP is fixed after considering the margins for cane farmers including the production cost, transportation expenses. It is the minimum sugar price the farmer is guaranteed of getting, the mill owners can pay the farmers any amount above FRP.

Uttar Pradesh, Uttarakhand,Punjab, Haryana and Tamil Nadu declare their own State Advised Price (SAP) for cane. Maharashtra, Karnataka, Andhra Pradesh and Biharare some states which follow FRP system.

The SAP states has lot of disadvantages like the cost of production will be high but have to compete with Sugar produced in FRP-paying mills which can be a loss to the SAP paying mills. Another drawback would be when the sugar price is low , where mills would fail to pay SAP. The SAP is much higher than the FRP. The SAP in UP for the 2010-11 seasons was Rs 205 per quintal whereas FRP was just Rs 139.12 per quintal.

The report indicates the domestic sugar balance is expected to be tighter than the market believes. The checks suggest SY2011 production of 24 million tonnes. The market is expecting 25 mt. While the market sees limited pricing power in a sugar surplus year(s), in view of the tight industry balance expected, a 10 per cent increase of sugar prices in the second half of SY11 and largely stable prices in SY12 is likely. However, prices correct if SY12 production hits 28 mt.

Category: increase factor sugar, india sugar price, Sugar, sugar cane, sugar outlook 2012, sugar prediction, sugar price, sugar surplus 2011