Speculators drive up sugar prices ahead of Ramazan

KARACHI: Sugar prices have increased once again, this time by Rs1.5 per kilogramme in wholesale markets. Ex-mill price of the sweetener jumped from Rs64.75 to Rs66 per kg during trade on Monday while wholesale price increased from Rs65.50 to Rs67 per kg.

“Demand for sugar has spiked while supply from mills has remained static, so prices increased,” Chairman Karachi Wholesale Grocers Association, Anis Majeed, told The Express Tribune. He added that the Trading Corporation of Pakistan has already been instructed to supply sugar into the open market, besides releasing the commodity to utility stores.

“They do not have a lot of stocks but even small injections into the wholesale market will help stabilise prices ahead of Ramazan when demand is expected to shoot up,” contended Majeed.

The government has instructed the TCP to supply 100,000 tons of sugar to open markets of all four provinces during the holy month, including 50,000 tons for Punjab, about 20,000 tons for Sindh and the rest to other provinces.

Wholesalers said that speculative buying was being witnessed as investors were entering the sugar market with a view to making quick gains in Ramazan.

Millers contend that the latest increase in wholesale rates has been caused by speculative trading, not by supply mismanagement. “Mills are supplying sugar in the market based on their current stock levels,” said Chairman All Pakistan Sugar Mills Association, Iskandar Khan.

He added that international prices of the sweetener are also moving higher and that sugar mills have conducted operations in a fair and transparent manner the whole season.

“Mills have an adequate supply of sugar for the next two months and we have been reiterating this for the past few weeks so that people do not resort to panic buying and play into the hands of speculators,” said Khan.

Experts commented that TCP’s inability to import sugar on time has aggravated the situation. They pointed out that tenders worth 150,000 tons of sugar were awarded at unrealistic prices and later cancelled because the suppliers were unable to honour their contracts.

They said that the delay in imports by the TCP will also cause additional losses to the government because now international prices have increased and fresh tenders will have to be granted at these inflated rates.

An increase in sugar prices is expected to impact retail rates of a wide assortment of food items in coming days. Bakeries and sweet shops are some businesses that use a high proportion of sugar in their merchandise.

Experts said that food prices generally trend higher in Ramazan and this year is no exception. The latest hike in sugar prices has already been incorporated by many retailers despite having acquired stocks before the increase.

Published in The Express Tribune, August 3^rd, 2010.