|Chennai||Rs. 24020.00 (-0.17%)|
|Mumbai||Rs. 25020.00 (0.28%)|
|Delhi||Rs. 24450.00 (0%)|
|Kolkata||Rs. 24600.00 (-0.32%)|
|Kerala||Rs. 24050.00 (0%)|
|Bangalore||Rs. 24160.00 (-0.17%)|
|Hyderabad||Rs. 24030.00 (-0.12%)|
Raw sugar imports now total around 500,000 tonnes. Some white sugar too, came from Pakistan, itself desperate to get rid of a surplus, ahead of serious border issues. In his final committee meeting as president of Indian Sugar Mills Association (ISMA), Gautam Goel made the pertinent point that for the industry to be able to clear cane dues in time to ensure sustainability of current levels of sugar production, one policy response had to be to check imports. In endorsement, former president of the ISMA, Om Prakash Dhanuka, says, rigid control of foreign origin sugar arrival is de rigueur when mills in north India, bearing the brunt of arbitrary increases in cane prices by states are not able to recover production cost from open market sugar sale. Import temptation of some when world sugar prices have hit the bottom is, however, understandable, says Dhanuka.
For the third season in a row, the country will be producing sugar in excess of domestic requirements of about 22 mt, notwithstanding delayed start in cane harvesting and crushing in some drought affected centres. The general expectation is 24.3 mt of sugar production in the season to end in October 2013. Based on past experience of occasional truant behaviour of weather disturbing cane supply to mills or fall in sugar recovery rate, a margin of error should accompany any output forecast at this point. In the meantime, however, a combination of highest opening stocks since 2007-08, good production outlook, though some two mt lower than last season, and market sentiment upsetting imports, has brought sugar prices down to a level proving hurtful for factories in Uttar Pradesh and other northern states. What also has worked against northern factories is a long, hard winter and lack of sunlight impacting recovery. Winter is also the time when sugar buying by bulk consumers like soft drinks and ice cream makers dips. At the same time, the dread of unpaid cane bills rising beyond acceptable levels was a pressure on factories to heavily unload sugar in the market even at the cost of sending prices down.
Facts on the ground in UP and Bihar are such that payment claims of farmers for cane supplies will reach alarming levels as the season advances. Sections in the government and industry think some amelioration will happen if a portion of sugar surplus is exported. The food ministry is contemplating issuing notification for exports to start. But ISMA Director General Abinash Verma says world sugar prices are ruling at levels to render our “exports completely unviable”. Indian sugar exports, according to Verma, become viable if white fetches prices in excess of $650 a tonne. The March white price at London Futures Exchange has sunk well below $500 a tonne. Raws at New York Intercontinental Exchange at 18.42 cents a pound are on bottom discovery. Incidentally, rising global inventories have led Goldman Sachs to scale down its price forecast for raws from 22 cents a pound by a few notches. Dhanuka thinks New Delhi could still make exports a viable proposition by giving subsidies, such as defraying cost of transportation allowed by WTO. But what about the industry heeding the advice of Food Minister K V Thomas that factories should focus on improving “technical efficiency to reduce conversion cost in a bid to compete globally”. In case the government finally redeems its commitment to the ethanol blending programme, factories will realise better value for cane by-product, molasses.
Verma is right that world sugar prices will not be export encouraging for us in the near future. A Barclays commodity specialist says, “We expect the third consecutive global surplus in 2012-13 with stronger-than-expected production in Brazil to continue to pressure prices.” India, Thailand and Russia have come for modest downward revisions to production projections. But Rabobank says all this has been “offset by upward revisions to output estimates in Brazil, Mexico and some other sugar producing centres”. The Brazilian sugar industry association UNICA says the country’s centre-south region is having a record output of 34.1 mt tonnes in 2012-13, up from its previous forecast of 32.7 mt. What is more, consultancy group Datagro is projecting an all-time high sugarcane crop of up to 590 mt next season. No wonder, International Sugar Organisation has raised global sugar surplus estimate to 6.18 mt. Rabobank, however, puts it at 6.6 mt. Quite discouraging for sugar prices.