2
Causes of the infamous Indian Sugar cycle
Increase in Sugarcane Area
Higher Sugar Production
Decline in Sugar Prices
High Cane Price Arrears
Decline in Sugarcane Area
Lower Sugar Production
Increase in Sugar Price
Improved Profitability
Sugar Production cycle is no more !
4
2004-052005-06
2006-072007-08
2008-092009-10
2010-112011-12
2012-132013-14
0.0
5.0
10.0
15.0
20.0
25.0
30.0
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
India Sugar production (mmt) LHS Cane price as % of Sugar Price
Mills cane price and Revenue sharing
MILLS HAD ACTUALLY PERFOMED VERY WELL!!
Rangarajan Committee suggests to pay 70:30 ratio to farmers but mills have actually paid more !!
mm
t
5
India : Long-term outlook
India to remain a flat tire but a perpetual importer
Weather to drive Ethanol to resolve surplus Cane Price rationalization Future sugar realization Refineries to be a weapon
6
Are we repeating the history?
• IN 2006/07 and 2007/08 the production was surplus over consumption and closing stocks at 11 mmt
• 2014/15 closing stocks are estimated close to 10 mmt and the prices depressed with surplus production next year and hence only export seems to resolve the problem
• Continuation of raw sugar export subsidy is very important.
7
mm
tWhere does Surplus sit in India
Nov-12
Dec-12
Jan-1
3
Feb-13
Mar-1
3
Apr-13
May-
13
Jun-1
3
Jul-1
3
Aug-13
Sep-13
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
1.3 1.63.8
6.2
8.0
8.98.2 7.1
5.94.8
3.7
Land Locked UPCoastal states for exports (MH, KNK, TN & GJ)Land locked states other than UP
Available for exports
Available for exports
Source: ED&F Man research
Currently approximate position
8
Import parity and cost vs what domestic trades
1. Import parity has been negative basis various duty regimes
2. Domestic market has always traded at export parity than trading at import parity
9
Supply & Demand -2014-15
Fig in MMT. HITS & MISSES
Year 2014/15 2015/16
Op Stocks 7 9.7Huge stocks as world market has kept export parity
away and Indian sugar did not got opportunity to export
Production 28.2 27
Imports 0 0
SUPPLY 35.2 36.7
Dom. Con 25 25.5 This seems even high in low price regime
Exports 0.5 3 This 3 mmt has be to exported minimum in 1/516 season
Carry Over 9.7 8.2
Stock Use 4.6 3.7
10
Strategy Promote exports at some discount to match export parity
Increase the realization on balance production up to import parity levels
11
Need revenue sharing model for cane pricing
Need to ensure that surplus is exported to world market at export parity
Ensure that domestic realization is better for balance production.
Support of big players from other states except Maharashtra is required
Conclusions !!!!