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India Sugar Outlook 2016 onwards - A Pictorial Representation

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.

Déjà vu... (Climate Change.. coincidence or reality in making)

I wrote this blog post on 08th Feb 2012 (3 years back)(http://priyendra.blogspot.in/2012_02_01_archive.html).. Looking at data points available at that moment (data point to a common man through internet) dots were connecting.
Made movie as base for my views so that communication is easier. I personally believe that a Mini Ice Age is something which is far closer to reality then global warming... Nature knows how to balance and it will take care of itself.

After 3 years I see many reports coming in and are relating to movie... what a co-incidence :)
Time to start collecting some fire-woods :)

http://ecowatch.com/2015/10/16/atlantic-ocean-currents-climate-change/
celebcafe.org/could-the-day-after-tomorrow-s-apocalyptic-climate-scenario-really-happen-9675/

February 8, 2012

Climate Change.. coincidence or reality in making

There is a High level climate change conference being held in New Delhi for 3 days.. (http://www.commodityonline.com/news/International-climate-change-conference-in-New-Delhi-45822-3-1.html) all experts from around the globe have gathered to discuss climate change.. 


May be a coincidence that the movie "the day after tomorrow"(http://en.wikipedia.org/wiki/The_Day_After_Tomorrow) also has a scene where a high level meeting is held in Delhi to discuss the climate change and Hero of the movie Jack gives his readings on climate change and scene followed by a snowfall in Delhi... and after that doom starts...


today Mumbai is chilling like never before and reminded me of Delhi weather.. MP and UP its raining.. leh registered lowest temperature in last 100 years.. 


Europe and Russia are under severe cold wave where temperature dipping as low as -30 degrees....(http://www.dailymail.co.uk/news/article-2097779/Europe-weather-Snow-covers-continent-temperatures-plunge-MINUS-40C.html)


well I know its just a hypothetical scenario.. but seems too real... as weather patterns have changed so much that in my last 11 years in Mumbai.. winter is getting chillier year after year...  rains are erratic.. 


better we all wake up.. I see Ice Age and not global warming.... 

Pulses (Dals) Story of India

Pulses prices have been on consistent bull run since last 1 year and despite multiple steps being taken, bull seems far from getting any tired. Most of the pulses rates have doubled in last 12 months and scenario is likely to remain for coming festival period as well.


If we look at fundamentals it all started with anticipated shortfall in production which was getting factored in primarily in Moong and Tur dal. Later it got fuel from poor monsoon and damage in standing crops in some regions. So far the story was pure fundamental based and it triggered price rise to the extend of 30-40% for like to like period of last year. while all these natural factors were in play, unfortunately Govt failed to anticipate and was slow to react to it. Imports were ordered but few thousand tonnes against demand of multi million tonnes would never be enough. It is generally assumed that if Govt takes some strict steps and order extra imports/ tighten hoarders to control, prices generally comes down. But that scenario is likely when price rise is driven more by  pure speculations & less on fundamentals.

This time Teji (Bull run) was primarily driven by Fundamentals like Shortage, poor monsoon, limited import pipelines and ever increasing demand of Indian consumers This was supposed to have just limited to 2 main dals Moong & Tur. Sustained bull run and inaction from responsible authorities gave clue to Bulls and they triggered artificial shortage across Pulses be it Massor, Urad, Chana etc. Today we stand and look at below price points in nearby retail stores.

All in all my personal view is that prices are stretched way too far and a sharp correction of 15-20% is just round the corner. Steps are being taken to increase domestic production like increase in MSP but a lucrative crop incentive, production subsidies, assured procurement and crop insurance will be the key to increase domestic availability.

Above will be short-term measure and to make availability a sustainable feature we need to look at alternates & the next step will be to have a "Post Harvest Management" process in place. (Most likely my next blog topic).

We are consumption driven country and we have to ensure we are putting more efforts to speed up infra & logistics sector development. Our farmers are more than capable of producing to feed every countryman all we need to do is to support them with good returns and ensure minimal losses on account of supply chain and storage.  
      

Grocery Retail - What to expect and who will succeed

In last 1 year we seen some amazing headlines made by retailers of the country.. primarily driven by Online/App based retailers and on few occasions by a few Brick & Mortar retailers through closure or merger of Chains. Nevertheless its exciting time to be in that space.  We saw some great successful ventures in Books, Apparels, Mobiles & home appliances retailing... Even Jewelry & Secondhand retailing is also gaining foothold besides some creative ventures. In this burgeoning Industry where every month is a welcome of new retailer I would like to draw attention towards a segment which has largely remained one of the most challenging sector of growth is Grocery Retailing.    

In Grocery retailing I feel that those with experience on Merchandising, Customer buying behaviors, insight on consumption habits (understanding of taste buds) and most critically robust supply chain network would lead the pack.. Who eats Sona Masoori Rice & who will prefer a Matta or Arwa Katarni Rice. Whether customer would buy large pack of Toor Dal and smaller packs of Moong and Chana Dal or vice versa and interestingly this changes with every 100 miles we drive in any Indian city/ state...

In short an omnipresent retailer will have advantage over single platform Retailer. However the fact remains that Indian consumers have surprised everyone with such fast and smooth transition towards App/web based retailing and amazingly it already accounts for 1% of total Retail Sector in India...

Will keep posting my views.. thanks for reading....   

Indian Retail Market - Opportunities in Food Retailing - Precursor

I feel that Today in India, Retail is divided into 2 large part (i mean broadly) one is on food side (Grocery) and other is on Non-Food lifestyle side (Fashion, Digital etc). What we read today and is getting huge media attention about Price cuts, new jobs, threat to brand owners etc etc  holds largely true for Lifestyle retailing but food retailing is altogether a different ball game, Indians still spend major chunk of money in food and that remains very much in the hands of brokers, middleman, channels etc and real benefit is lost for Producer as well as end consumer. What we need is an integration between Gram-Panchayat (For Supplies) + Brick&Mortar Retailer (To manager back-end storage & distribution) + Online Retailer (To scale up volume and expand geographies). I strongly feel that Indian consumer will surprise everyone with close integration and expansion of e/m-commerce. Just few personal views.. may worth a try to make it a reality.

Will keep downloading my thoughts on this topic for a while now... cheers

India Sugar Season 2014 - 15 Outlook

India's new sugar season has started (or yet to be started??).... On papers Oct-Sep is typical cycle though this time it seems to be getting delayed... Reason.. there are are multiple

1. Huge carryover stocks (close to 11 million MTs) which is highest ever.

2. Good Monsoon.. Good Sowing.. Better cane availability

3. Cane Pricing (The most critical point).. while there is decontrol on sugar sale but sugarcane prices are still driven by states based on there political needs. State Advised Price (SAP) is playing key role in delay in start of production. UP farmers are expecting close to 3000/mts and unfortunately Sugar Millers are realizing close to Rs. 29 per kg.

there may be other minor factors like no consent between UP Millers, drought in TN State etc etc. But fact of the matter is that despite delay in production prices are still under pressure and supplies are abandoned. 

Will keep posting new updates on India Sugar scenario... also starting on Edible Oil and Rice soon... 

Climate Change.. coincidence or reality in making

There is a High level climate change conference being held in New Delhi for 3 days.. (http://www.commodityonline.com/news/International-climate-change-conference-in-New-Delhi-45822-3-1.html) all experts from around the globe have gathered to discuss climate change.. 


May be a coincidence that the movie "the day after tomorrow" (http://en.wikipedia.org/wiki/The_Day_After_Tomorrow) also has a scene where a high level meeting is held in Delhi to discuss the climate change and Hero of the movie Jack gives his readings on climate change and scene followed by a snowfall in Delhi... and after that doom starts...


today Mumbai is chilling like never before and reminded me of Delhi weather.. MP and UP its raining.. leh registered lowest temperature in last 100 years.. 


Europe and Russia are under severe cold wave where temperature dipping as low as -30 degrees....(http://www.dailymail.co.uk/news/article-2097779/Europe-weather-Snow-covers-continent-temperatures-plunge-MINUS-40C.html)


well I know its just a hypothetical scenario.. but seems too real... as weather patterns have changed so much that in my last 11 years in Mumbai.. winter is getting chillier year after year...  rains are erratic.. 


better we all wake up.. I see Ice Age and not global warming.... 

India Sugar Price forecast for 2012

Sugar market seems to have become rather more predictable now... prices were expected to rise in November and they rose.. December will be the month of dullness and so far it has been very boring..everyday prices coming down. 

What I wrote in my last blog about price rise actually got pre-poned and prices jumped up sharply in November month.. now I see prices to re
main slugging in most part of December but I also sense an underline relief rally which should give some support to prices during last week of December and 1st week of Jan '12. Reason is simple .. Festive demands and liquidation of pipeline stock withing December. 

A lot may depend on Sugar release for Jan '12. International market will have very limited impact on Indian sugar prices. 

I think prices will stabilize around 10-12th Dec and may see little trading during mid-month but I see prices moving up by approx Rs. 2/- between 26 Dec-7 Jan '12 (Orange Line). Post that prices will steadily come down down and may be April '12 may see some revival of prices.

These views are entirely personal and based on my own analysis and forecast. 

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. 

Global Crisis - More political and policy related and less of economic

There are a lot of media coverage and a panic reaction in financial market since last few days (Esp after Drama is US) Though I'm naive to put in comments on something so big but thought of sharing my personal views on recent developments....

Firstly I feel this time situation is far more complicated than 2008 economic crisis period as during 2008 time the focus was only on financial irregularities and their correction hence all efforts were put in to bring money flow back to market and ensure bad debts / dead money is cleaned off. For that Govts across globe took the hit and cleaned up most of the mess. But now Situation is much more complicated, its not just US Dollar and their debt limit which is cause of concern (if that would have been the case US would have printed more currency ($) to bring situation under control). This time the whole intent of doing the right things were put on stake hence it all spiraled.

Secondly this time esp in EU there is a much bigger problem has cropped up (which most of emerging market anyway facing) and that is of Socio-Economic Disparity. There is fast growth of people in western countries that are getting poorer due to economic slowdown and now with recent cut in social spending, this will increase more. This has led to fear among people and they have started to panic (which is visible in recent outburst of Riots in UK)

Third I feel if US and EU are able to overcome this crisis (which most likely they will esp US) there corporate (large companies) will become financially much more stronger and confident about future. This will lead them to expand in to new emerging markets much more aggressively and will look at hostile takeovers in Africa/ SE Asia/ India/ Japan. China being relatively closed economy will not face any trouble at home but will surely face tough competition overseas. It'll be a classic case of Hunter becoming Hunted.

These are some of the thoughts which are coming across my mind and will keep posting as and when I'm able to put words into it.

India's Soil Story

This is an excellent article published by Economic Times and its so true in times to come that we'll have deteriorated land and our food consumption will be rising year on year.

All we need is a Govt led research set-up which will educate Farmers on various pluses n minuses of using particular fertiliser in the field...

What India need is a sustainable growth in food production without compromising on land quality, whcih is very much possible if all stake-holders come together and work in same direction...

Its a long but very good article.. have a look

http://articles.economictimes.indiatimes.com/2011-07-12/news/29765398_1_soils-farmers-cereal-production

Silver...heading for 1,00,000 per KG

Silver today crossed Rs. 66000 per kg... and its just following one path... for a couple of years now. Still when one compare WHITE metal with Gold.. its still cheap. Silver once crossed $50 (about rs. 75000) mark in 1980 but that was short-lived and since then Silver was sleeping.

I feel that Silver is all set so cross that historical level and will touch Rs. 1,00,000 mark. When is one big question but looking at the increased focus and interest in Silver by all possible investors this seems to be a reality sooner than later. Keep fingers crossed....

nice article to read...

http://www.commodityonline.com/news/Watch-out-for-Gold-Vs-Silver-in-2011-38233-3-1.html

Silver has miles to go...

Silver outperformed Gold for nearly few decades in 19th century and now it seems the ame time is coming back... Silver has started to move faster and is likely to pick up some more steam and outperform gold in long-term.. this report I was going thru gives more or less same indication... go thru it ... http://www.kitco.com/ind/TimWood/apr012011.html

Miracle do happen... Brazil imports US Ethanol

High international price of Sugar worked as great incentive for Brazilian mills to turn to Sugar production rather ethanol.... Sugar production up 15% YoY and ethanol just 7% YoY....

The scarcity of sugar products in Brazil, the top producer, has led the country to turn to the US for corn-based ethanol to replenish depleted supplies of its own cane-based alternative, Agrimoney.com has learned. Brazil's North East region has, in an unusual if not unprecedented move, begun importing US ethanol to replenish supplies lost as soaring sugar prices encouraged mills to turn cane into sweeteners rather than biofuels. The move defies typical industry dynamics which, as sugar ethanol is less energy-intensive to manufacture than America's corn-based biofuel, typically makes Brazil's version significantly more competitive.

http://www.agrimoney.com/news/exclusive---sugar-squeezed-brazil-buys-us-ethanol--2888.html

India's yellow matar import on rise

India's peas import is at all time high... as on dec '11 it has surged 60% and is likely to remain on higher side only... Recent news on crop damages in MP due to cold has push domestic prices high and imports may remain attractive option for millers...

Sugar market update

Maharashtra quoting 27/- per kg duty paid whereas UP is around 29.2 duty paid... overall market sentiment is dull however buying likely to improve in next couple of days. Export ban delay has negative impact on market...

The Indian government would not be considering export of sugar under the open general license (OGL) in the medium term. The government may delay or cancel about 5 lakh tones of unrestricted exports under an open general license. Crushing is going on and supply is also good but the demand is limited, sugar millers preferred to wait rather than reducing the prices. However lower Free Sale Quota for February as compared to January is likely to trigger active buying in both spot and futures market

Sugar may not rally enough on Australian Flood

Was reading this article and this I think is making sense as Australia in Sugar space is a minor player and 20% damage in crop may have short-term impact of global sugar prices..

The floods in Queensland, which lifted world wheat prices on Monday, may prove less successful at supporting sugar values, even though the state is the centre of Australian production.

Phillip Futures analyst Ker Chung Yang forecast that sugar prices would "likely take a breather" in the short-term as rising hopes for Indian exports of the sweetener overcome concerns at Queensland's plight.

Queensland produces the vast majority of sugar in Australia, the world's third-ranked sugar exporter in recent seasons, after Brazil and Thailand.

However, sugar investors had already factored into prices the state's plight, which has brought the cane crushing season to a premature end, leaving an estimated 5.0m tonnes of the crop unharvested.

The Australian Sugar Mills Council last week estimated Australia's crush at 27.5m tonnes, the lowest for 19 years and 4.5m tonnes below initial forecasts.

"This has already been priced in, over at least the last two weeks," Mr Ker told Agrimoney.com.