Sugar prices... UP UP (Uttar Pradesh) and away

In continuation to my last blog what I was anticipating to happen little later may happen a bit sooner... There is a panic in UP and rest of north India.. All of a sudden mills have started to quote rs. 2 higher then y'days close.

Seems more like of a knee jerk speculative move.. but the kind of decision taken independently by center and state Govt this kind of reaction will keep coming. UP Mills are quoting as high as 3150 ex-mill. 

Agri minister was seen quoting " “There is surplus sugar. This is a golden time for India to enter the global market in a big way and get a better price, which will ultimately be provided to cane growers,” Pawar told reporters

Mayawati already announced higher SAP. Center is keeping mum and not looking in a mood to react anytime soon. 

So in a nutshell UP prices will be firm in short term. There are rumors of 35-36 exmill prices also but I personally feel 32-33 is where it'll stop. Reason ... There are other states as well producing Sugar. 

Maharashtra, India's largest producing state is sitting again on a good healthy crop. There a fight going on between mills and farmers but it won't impact prices much so fundamentally there are no major reason for price increase in Maharashtra, so like a couple of years back, Sugar will start to move from MH to UP and I'm sure a couple of deals would have already been broken in last 2 days. Any gap beyond Rs. 2.5 will trigger sugar flow to UP/ NCR. 

Southern states as of now more content with managing local market alongwith export commitment but I sense there is also some excess sugar available, however I'll have to authenticate with some millers down there. 

So overall I feel that this sudden reaction will cool down in a few days but it'll help UP millers to set new base of may be around 31 ex-mill for coming months. 

One lesson or rather pattern I've learnt in my 11 years of career that whenever there is a sudden jump in price of a commodity at the beginning of the season then rest of the year that commodity suffers and remain extremely range bound with bearish tendency.   

Next I'm gonna share State wise production likely in coming season and more on the lesson above I wrote about.. till then Happy Trading 

Cost of Cane will have direct impact on Sugar prices

Just thot to share crisp overview :

1. India's sugar production likely to be less than last year. (likely to be 24.7mmt)

2. Driven by political move.. cane prices already increased in UP.. rest all will follow suit..

3. India will export atleast a million ton of Sugar if not more...

4. Brazilian output is anyway likely to be lesser than earlier forecast

So at a macro level everything is rightly placed for higher Sugar prices.. but all we need to wait n watch is will it happen now or later... 

I feel that first round of price increase is already underway and prices in India have already gone up by Rs. 2.5 per kg in last 1 month. This is likely to inch up further by 50 paise or so. Second round will start after mid December which may continue till Jan 14th. I see prices to be in range of 32-33 ex-mill in that period. 

Well these numbers are based on my personal understanding which is based on current market scenario and any Govt intervention may have impact on prices. 

Equation for now is 

Cost of Sugar cane : 2400

Operation cost       : 300

Excise                    : 100

TOTAL                : 2800/-

So worst case scenario cost of producing Sugar is anyway going to be min 28/- per kg and if Farmer agitate (which surely going to happen) this cost will be no less than 30-31 ... 

So in a nutshell be prepared to shell out around 35-36 per kg at retail level. Also Institutional buyers like Nestle, Britannia, Coca cola, Pepsi, Cadbury etc.. I feel that they must start booking some quantities in advance (Forward contracts) to gain the price advantage. 

Time is coming to buy Sugar company shares...

Good time to start accumulating Sugar company stocks ....


Bajaj Hind and Renuka can be a good buy.... Coming season (2011-120 again going to be depressing year with likely production of approx 26mmt but it'll set up a real good season a year later... lets see how market plays out.. these are my own views.. :) 


Growth of as much as 10% in sugar output this season from India -- the world's second-largest producer after Brazil -- could be significantly lower in the following harvest. India's production generally sees a three-year cycle, with two consecutive years of high production and one year of lower output. Head of the Indian Sugar Mills Association says those two years were the previous harvest and 2011-12 year. The 2012-13 harvest "is the question mark," Abinash Verma says. Raw-sugar futures are rebounding from a recent slump, mainly on doubts over Brazil's harvest size this year. July delivery recently 3.3% higher on ICE at 22.65c/lb.