India Sugar Scenario
India is the largest consumer and second largest
producer of sugar in World. Sugar is produced in 115 countries. It is extracted
from different raw materials, sugarcane and sugar beet. Sugarcane is cultivated
under tropical climates, while sugar beet is grown in temperate regions. Of the
115 sugar producing countries, 67 produce sugar from cane only, 39 from beet
only and 9 from both cane and beet. Brazil, India, Thailand, Australia and Cuba
are the largest sugarcane producer. Other beet sugar producing countries
include the US, Turkey, Ukraine, Poland and Russia.
Sugar production is effected by acreage and
yield, sugarcane availability, recovery percentage and duration of crushing. Of
these, area is highest in Uttar Pradesh followed by Maharashtra, yield is
highest in Tamil Nadu, and average recovery is highest in Maharashtra. Average
duration of crushing is almost equal in Maharashtra, Gujarat and Tamil Nadu
(about 150 days) while in Uttar Pradesh it is about 100 days only. Maharashtra
is the largest producer of sugar in the country followed by Uttar Pradesh.
Together these two states account for over 60% of the total sugar production in
the country. Total production for marketing year 2011-12 is estimated at 26
million tonnes, with the consumption at 22 million tonnes
Sugarcane Pricing The Central Government fixes the Fair and Remunerative Price
(FRP) for sugarcane. Some of the State Governments announce State Advised
Prices (SAPs) for sugarcane, generally higher than the FRP.
* Monthly Sugar Quota Ministry of Food and Consumer Affairs, every month give monthly quota for sugar mills to release amount of sugar for sale for that particular month. Mills’ have to sell 10% of the quota to government for PDS (Public Distribution system) known as Levy Quota and rest for sale in the open market as Non Levy Quota.
* Foreign Trade Policy Government controls over import and export of sugar under Open General License (OGL) and Advance License Scheme (ALS).
* By-ProductsGovernment policies for ethanol and other by-products
* Stock holding and Turnover Limits
* Command Area
* Recovery
* Acreage
* International Markets
Apart from demand and supply, there are other major factors which influence and determine the sugar prices. The commodity falls under the purview of the Essential Commodities Act, 1955. Market participants trading in Sugar Futures should track the market by tracking and analyzing demand and supply position including Beginning stock, Production, Imports, Consumption, Exports and Ending stocks and government policies such as Sugarcane pricing, Monthly Levy and Non Levy sugar quota, Stock holding limit, Turnover limit and Export policy.
* Monthly Sugar Quota Ministry of Food and Consumer Affairs, every month give monthly quota for sugar mills to release amount of sugar for sale for that particular month. Mills’ have to sell 10% of the quota to government for PDS (Public Distribution system) known as Levy Quota and rest for sale in the open market as Non Levy Quota.
* Foreign Trade Policy Government controls over import and export of sugar under Open General License (OGL) and Advance License Scheme (ALS).
* By-ProductsGovernment policies for ethanol and other by-products
* Stock holding and Turnover Limits
* Command Area
* Recovery
* Acreage
* International Markets
Apart from demand and supply, there are other major factors which influence and determine the sugar prices. The commodity falls under the purview of the Essential Commodities Act, 1955. Market participants trading in Sugar Futures should track the market by tracking and analyzing demand and supply position including Beginning stock, Production, Imports, Consumption, Exports and Ending stocks and government policies such as Sugarcane pricing, Monthly Levy and Non Levy sugar quota, Stock holding limit, Turnover limit and Export policy.
Sugar futures at NCDEX platform was introduced on
July 27, 2004 with contracts for October 2004, November 2004, December 2004 and
April 2005. Sugar Futures contract at NCDEX is compulsory delivery contract
with trading unit and delivery unit of 10 MT and tick size of Re 1 with
Kolhapur as basis centre. The contract also provides for deliveries at the
additional delivery centres- Belgaum, Delhi, Kolkata, Pune, Sangli and Solapur.
In the 2009-10 seasons, sugar production fell to 18.9 million tonnes, causing a sudden jump in the prices. Average open interest before delisting of sugar contracts was close to 125000 with average daily trading volume of about 50000 MT. After relisting on December 27, 2011, even with the restrictions imposed by the Government; the contract has witnessed a cumulative daily traded volume of over 20,000 tonnes. The open interest is also fairly high with the average open interest close to 50,000 tonnes, which suggests good depth in participation. Sugar contract is high delivery contract with very less defaults, which suggests interest of cash & carry arbitrage as well. After announcement of removal of sugar stock limit on 22nd November, open interest and trading volume has increased drastically in NCDEX.
In the 2009-10 seasons, sugar production fell to 18.9 million tonnes, causing a sudden jump in the prices. Average open interest before delisting of sugar contracts was close to 125000 with average daily trading volume of about 50000 MT. After relisting on December 27, 2011, even with the restrictions imposed by the Government; the contract has witnessed a cumulative daily traded volume of over 20,000 tonnes. The open interest is also fairly high with the average open interest close to 50,000 tonnes, which suggests good depth in participation. Sugar contract is high delivery contract with very less defaults, which suggests interest of cash & carry arbitrage as well. After announcement of removal of sugar stock limit on 22nd November, open interest and trading volume has increased drastically in NCDEX.
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