Sugar futures on the National Commodity and Derivatives Exchange are likely to trade flat next week after subdued demand for the sweetener from bulk consumers and as the government is likely to bring in rules to make it compulsory for sugar mills to export surplus sugar, analysts said.
"Subdued demand for the sweetener in domestic market will pressurise the prices of sugar," said Ravi Shankar Pandey, research analyst with Karvy Comtrade.
Domestic demand for the sweetener has fallen as monsoon, which usually brings cold weather, has started in many areas, traders said.
Also, total sugar supply is expected to touch 38.4 million tons in 2015-16 after accounting for 10.4 million tons of carry-over stock, from the current season, according to estimates released by Indian Sugar Mills Association (ISMA).
Meanwhile, consumption on the other hand is seen at 25.2 million tons, leaving a huge surplus of 13.2 million tons in the new season.
However, sharp fall in sugar prices may cushioned as the government is likely to bring in rules to make it compulsory for sugar mills to export surplus sugar, analysts said.
"Export of excess sugar will help to reduce the surplus output as well as to curb prices," said Abhijeet Banerjee, research analyst with Religare Commodities.
Government may make it compulsory for the sugar mills to export a fixed quantity of sugar to solve the problem of glut and ease industry's liquidity problem, reported Reuters Wednesday.
India is likely to bring in rules to make it compulsory for sugar mills to export million of tons of surplus supplies to support local price, said Reuters quoting sources.
A final decision rests with Prime Minister Narendra Modi, who discussed the politically sensitive issue at a weekend meeting with ministers, officials and sugar mill bosses, said the two government sources.
Meanwhile, mounting arrears and surplus stocks of sugar forced sugar mills to sale their produce at depressed prices which accelerate the exportable supply due to lower price.
Total cane arrear has dropped a bit due to aggressive sale by domestic mills but total arrear still stood at 181.12 billion till mid June, as per government officials.
Raw sugar October contract on the Intercontinental Exchange (ICE) slumped 2.82% to 10.85 cents per pound for the week ended Aug 6.
White sugar October contract on the London International Financial Futures and Optional Exchange (LIFFE) fell 0.72% to $346.90 per ton for the week ended Aug 6.
Sugar is expected to find support at Rs 2,150 per quintal and resistance at Rs 2,450 per quintal next week, analysts said.
Sugar for October delivery traded in Rs 2,220-2,335 per quintal range in the past five trading session on the National Commodity & Derivatives Exchange.
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