Bull Run in Wheat - Impact of Russian Drought

Russia has become an increasingly important force in the global supply of grains. Russia provided 14.5% of global exports from the 2009-10 crop, according to the Food and Agriculture Organization. Moreover, it has played a key role in meeting rising import demand, exporting 17.5 million metric tons of wheat, up from less than one million in 2000-01 and the move to ban export has reignited fears that nervous governments will begin hoarding their own supplies, potentially causing a shortage. Nations that already are struggling to feed themselves are scrambling to lock in deliveries.

This bull run (wheat prices almost doubled globally in last 2 months) definitely will have some impact on India and ncdex prices have started to reflect that. However Govt is under tremendous pressure and with bumper crop and stock in India, prices here are less likely to go up. Now that gives India a natural advantage in International market. We can export so called surplus wheat (as media highlighting every day that wheat is rotting all across India due to poor warehousing).

Now the big question is - How wise it'll be open export window for Wheat???

Will share my thoits on that in my next post.. till then happy trading.. enjoy the weekend :)

Free Fall Sugar

This is ex-kolhapur price... market is expected to remain on bearish side.. and is likely to go further deep post diwali.....

most of the people in industry and trade orgaisation are talking about 23-24 mmt sugar production in India... but I can see its being no less then 26 mmt... lets see last season prediction by me was closest to what reality is... (i told 18.5 mmt as against actual being 19 mmt and govt forecasted 14.5 mmt.. what a joke :)

Sweet Dream turn Nightmare - The Sugar Story

After a maddening bull run, I'm back to share my thoughts on the future the industry gonna experience on the backdrop of sharp jump in production numbers and steep fall in prices. This time I'm planning to write a series of articles on Past, Present and Future of Sugar industry and Why and How it's time for Govt and Producers/Mills to learn and take advantage of not so exciting perod to build a sustainable & profitable indutry.

So my next post will start with Part-I and will focus more on Past, The Sweet Dream Period

Price movement of Agri commodities

Out of all agri commodities Sugar has been a clear cut out performer with prices moving in one direction and is breaking 3 decades highs.

Most commodities have experienced some price resurgence in 2009, recovering from the losses in the second half of 2008. The price of Brent crude oil, which collapsed from USD 134/barrel in July 2008 to just USD 42/barrel in December 2008, has been climbing back to reach an average of USD 73/barrel in October 2009. Food commodity prices (comprising of cereals, vegetable oils, protein meals, meats, seafood, sugar, bananas and oranges) rose by 14.6% between a low in December 2008 and July 2009. However, from July to October 2009, food commodity prices fell by 3.5% and prices in October 2009 remained 26% below their peak of June 2008. Some commodities have seen prices falls over the past few months. Maize and soybeans prices have fallen by a respective 7% and 16% since May 2009, while wheat prices have dropped 23% from May to USD 198.8 per tonne. This fall in price has made grains a more competitive feedstock for ethanol production vis-à-vis sugar crops. Commodity prices still remain significantly higher than five years ago, which marked the beginning of the commodity boom. Soybeans and maize prices in October 2009 were 81% and 74% higher than in January 2005 respectively. Crude oil prices were in October 2009 65% higher than in January 2005. Wheat prices, the worst agricultural commodity performer over the past 5 years, are still 29% higher today than they were in January 2005.

World Sugar Outlook 2009/10

The world sugar economy is facing a second consecutive year of a significant gap between world consumption and production. The distinctive deficit phase characterized by a significant excess of global consumption over production, as well as a further reduction in stocks and tightness in the world stock. A continuing decrease in the level of stocks is expected to further support world market prices.

--> Production – 160 mmt
--> Consumption – 168 mmt
--> GAP – 8 mmt

Most of the major sugar exporters have seen a strengthening of their currencies against the US dollar over the past six months. This has, to a large extent, cushioned the magnitude of world sugar price rises when expressed in national currencies.

India.. net sugar importer

India... likely to remain importer for atleast 2 more seasons... unless farmers go beserk and again produces all time high cane...

World Sugar Demand & Supply

Latest estimates by some of Sugar Industries leading trade house and analysts...

source: www.sugaronline.com

Sugar 2009... the year so far

Sugar prices in India, the largest sugar producer after Brazil, have risen dramatically this season, starting October, due to then projected 32 % decline in the output to 18 million tones, which now is projected to be around 16 mmt. Feb saw sharp jump in prices as Food minister ruled our stock limit imposition. However eyeing election govt came up with series of announcement to control spiraling sugar prices starting with allowing duty free imports and followed by imposing stock limits. Price have fallen by almost 10% since the highs made in Feb and are likely to remain stable in coming days as no fresh bulk buying or demand season is coming up and govt will keep the pressure on traders and hoarders to control price rise. However outlook for April month onwards definitely looks promising which I'll write in my next blog... keep reading

Stock Limit announced

India Thursday issued a notice that sets sugar stock and turnover limits, with ceilings to be announced later by state governments, according to Dow Jones. The move limits the amount of sugar that can be stored by companies. The notification will be effective from March 27 for the following four months, the statement said. In Kolkata, the capital of the eastern state of West Bengal, recognized traders can hold stock of 10,000 bags of 100 kg each, while others are allowed to hold a stock of 2,000 bags. "It will bring down the prices by INR40-INR50 per 100 kg (US$0.77-US$0.96) as traders would offload their surplus stocks," said Mukesh Kuvadia, secretary of Bombay Sugar Merchants Association.

India Sugar... We never change

In my last review I was quite optimistic about the change and progress Indian sugar industry was experiencing, but sadly it was very short lived and today when I look at the numbers it reminds me of same story of last booms and busts every 3-5 years..... The way India's production numbers are falling outsiders are making joke of it and saying that "we never change". Ironically during 2008/09, India was indeed an exporter of sugar, about 5 million tonnes of sugar were exported, including 2.9 million tonnes of raw sugar. Now this year we are Net Importer and have already contracted 1.5mmt primarily from Brazil. I estimate that we should close this season with about 17.5mmt with consumption of about 23mmt.

As we talk to states MH is down about 45% to 5.1mmt, UP at about 4.8mmt and rest others also declining in more or less same %age.

Sugarcane farmers have been paid really well this season which will prompt them to grow more cane in future and hence 2009/10 looks to be a better years in terms of availability.

Imports have already started (Early contracts were made @ $310-340 per mt) which today looks a real good buy. World market reacted to Indian demand and gone up sharply to touch $400 per mt recently.

I personally feel very sad about the way we operate such critical industry to take some political mileage and capture vote banks. Rather there is a strong need to empower farmers to grow more crops not only sugarcane but more of wheat, soybean, cotton etc to ensure that our 70% population, which lives in village and is depending on agriculture, propels the economic growth to take us through this recession...