Last few months have brought some cheer back to Sugar Industry as well as traders. After a massive fall in prices now finally some recovery is being made & this looks to be a more sustainable and realistic journey.
Lets start with World Sugar Balance and how this is playing its part in overall recovery in Sugar prices
World production has rather remained very flat and recent decline in Brazilian production put extra pressure on overall availability. Ending Stocks are likely to be reduced to 41mmt a clear 10%+ cut since 2013-14.
Globally Sugar prices have remained subdued for a very long time and only recently we are seeing some green shoots. Our domestic prices have always been higher compared to international rates.
This was one of the price reason why India was out of International market for such a long time.
Now if we look at Domestic Scenario I see tides are turning towards a bull market or atleast non-bear market, Production is likely to be a tad lower than last year and extra pressure on mills to export resulting in some spikes in prices. Though estimates are coming in for lesser consumption but in my view this is what will really trigger a bull run in market where we will see a gradual increase in demand be it from industries or household.
<= Domestic Sugar Price
Now if we look at performance of Sugar Mills in India we see clear cut hopes of price revival. Major Sugar Mill's share prices are exactly reflecting the way domestic Sugar prices have moved.
In last 6 months major Sugar companies have outperformed Index Share market by almost 50%
Key here is the way Sugarcane advised prices have moved and in most states prices have not been increased which is a good sign for Sugar Mills
In a nutshell we can now realistically predict that next 2 seasons are going to be good for Sugar Mills which will help them realise better money per kg plus also clean-up their balance sheets a bit.
