Date:20/05/2005 URL: http://www.thehindubusinessline.com/2005/05/20/stories/2005052001291000.htm

Back Sugar May futures dip 7 per cent

Our Bureau

Mumbai , May 19

MAY contracts of medium grade sugar at the National Commodity and Derivatives Exchange (NCDEX) declined by 7 per cent this month on continued speculative activity, despite demand exceeding supply.

The contracts are due to expire on Friday and the delivery would be settled at Muzaffarnagar.

Prices were down by Rs 135 to Rs 1,698 a quintal on Wednesday from Rs 1,831 on April 28, the day on which quota was announced for May.

As against this, spot prices at Muzzafarnagar market dipped Rs 50 to Rs 1,741 a quintal, according to NCDEX data.

Trading volume was down to 15,400 tonnes on Wednesday from 18,570 tonnes on May 2. Open interest was also down considerably from 76,640 tonnes to 42,000 tonnes, as most of the traders were trying to shift or settle their trading interest.

"Continued fall in futures prices have badly affected the physical market. Traders are confused and trading volumes in spot market have been considerably down at the major trading centres," a local trader said.

Average sales price realisation to most of the sugar mills have come down to Rs 1,575 a quintal from 1,700 a quintal, due to a sharp fall in May futures prices.

Average price realisation in Uttar Pradesh is around Rs 1,570 a quintal ex-mill. Similarly, it is Rs 1,600-1,620 in Gujarat and Maharashtra and Rs 1,530-1,550 in Tamil Nadu, Karnataka and Andhra Pradesh.

In a recent meeting of the Forward Markets Commission with Government officials, the Government was seriously thinking to increase the penalty rate on sugar futures from the current 0.5 per cent to 3-5 per cent on suppliers, it they fail to give delivery, sources said.

Traders were also expecting some immediate steps by the Government to curb excessive trading in the futures market.