Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains!

Morning panic giving decent buying opportunities to all who missed. Balrampur and Dhampur available below 120. One can grab this opportunity and hold for next 5-6 months to reap very good reward.

Note:

  1. Those who thinks that today’s fall indicates the end of sugar rally are fooling themselves. check history and previous sugar rally details. Intermittently, all sugar stocks falls 10-12% 2-3 times followed buy price rise more than 25-30%. This is how they go up.

  2. Those who think Sugar rally is almost at fag end of its rally due to good monsoon and new upcoming crop, please see the data. We are witnessing shortages across the globe (Brazil, India, Indonesia US and now Vietnam). Domestic sugar prices are at 4 yr high (39) and ICE also above 20.4. All indicates huge shortages. and Crane is not a kind of crop where shortages can be filled easily next season or so. Shortages will remain there. Rally will continue…to me it seems till mid of 2017 at least. Ground level facts suggest the same.

5 Likes

Operators at there best…beating the hell out of all sugar stocks after Q1…
Now they will go under consolidation and accumulation …next up move expected during october due to festive demand.
REGARDS

I am posting this for the benefit of my fellow retail investors.

Sugar sector may see a correction / consolidation for next 1-2 months. However, this should be taken as a correction in bull market and sugar stocks are buy on dip.

Secondly, investors may buy sugar stocks only around important support levels…these supports can also be taken as target prices for individual sugar stocks too…

Balrampur. 115
Dalmia sugar. 120
Dhampur. 114
Dwarikesh. 256 & 220
Oudh. 104
Renuka. 15.30
Upper ganges 301
Ugar. 41

It is not necessary that all sugar stock will fall to these support levels…but it is very much probable that many sugar stocks will fall…and investors may consider buying those stocks.

The following procedure may be followed for purchasing the stock…

  1. if the stock turnsaround after hitting the support, then buy that stock.

  2. keep the support level as a stoploss and sell if the stock closes below the support.

  3. for a stock which has gone below the support, buy it again when it closes above the support.

Following this procedure you may suffer some whipsaw pain, but you all would be ideally positioned to gain from the next leg of sugar rally and would be invested at the bottom of consolidation.

Best of luck.

16 Likes

This is very constructive comments…Keep it up.thank you…

see the next rally in early September only

Thanks @Mehnazfatima

Well i got in to Upper at 440 and Dwarikesh was an act of foolishness('coz i entered at 371). I still repent it but what you can do.

I bought Upper with a vision that by the time crushing ends in Dec’16 it would touch around 900+( several people in the market told me this and then mix it with demerger), but with what is happening it seems highly unlikely.

I think i am done with my misadventure , i would just sit tight and wait for market to climb and study more on this cycle.

One more thing i got to know this time the sugar recovery from cane would not be great(for all in UP) in this crushing season due to not appropriate climate and this in turn could increase the cost of sales and decrease the overall profit despite heavy inventory.

Let’s discuss how low sugar recovery could impact stock price!! And if any one else has also heard about it request you all to please share. We see people are talking about acreages too( which is different from Sugar recovery from Cane).

Hi @Mehnazfatima

Balrampur Todays low 115.5 , cmp 120 !

Disc: Invested in Balrampur & Dhampur

Mahi : Vivek Sarogi the MD of Balrampur has claimed that there is a jump in recovery rate because a new variety of sugarcane was planted by farmers on the guidance provided by sugar mills. If that is the case, then there is no reason for the farmers to shift to any other variety of sugarcane…the farmers may have continued with the same high yielding cane variety. Thus the coming sugar season too should see a high recovery rate.

On the other hand there can be a very simple explanation for the higher recovery rate…if the mills have resorted to a uniform under weighment of sugarcan by 10%, then they will explain away the extra sugar produced as a rezult of improvement in recovery rate…obviously they cannot admit that they have armtwisted the farmers and recorded a lower weight for sugarcane supplied. In such a scenario, the recovery rate will fall in the next year as in upcycle, the farmers have an upper hand and will not agree to any underweighment of sugarcane.

We can only hope that the improvement in recovery rate is due to using new sugarcane variety…but we can know for sure only in April / May 2017…

1 Like

Mehnaz: Thanks

I agree new sugarcane was planted, i am failing to recall where did i read , somewhere it was said that along with sugarcane its the climate which contributes more towards higher/lower sugar recovery .It was said climate this year has not been for higher sugar recovery which we shall be seeing in revised estimates by ISMA whenever/howsoever they want to do.

In SS2016 every UP based mill was able to get more than 11%, this SS2017 they are not sure about it.

Depending upon the variety and sowing time it takes about 12 to 18 months for sugarcane to mature. Generaly January to march is the period of sowing and December to March is the period of harvesting. After harvest, generally a ratoon crop is cultivated from the re-growth. A Ratoon Crop is the new cane which grows from the stubble left behind after harvesting. Taking one ratoon after normal planted crop is a common practice in India.

With reference to yields Cane tonnage at harvest with best management practices can vary between 150 and 175 ton/ha in sub-tropical zone and between 150 to 300 tons/ha, which depends particularly on the length of the total growing period and whether it is a plant or a ratoon crop. The water utilization efficiency for harvested cane yield containing about 80 percent moisture is around 15 to 20 kg/m3

Toward maturity, vegetative growth is reduced and sugar content of the cane increases greatly. Sugar content at harvest is usually between 10 and 12 percent of the cane fresh weight.

1 Like

@itisworld Amit :disappointed_relieved: was it a fluke you mentioned 15% fall in upper for today ? or was it a calculated analysis.

Your error percentage is just 1.5% which is high but still manageable.

Please let all of us know more how were you able to get to this percentage, what all factors :tools: you considered.

And what trend you see for Upper and Dwarikesh for next 30 days?

15% was with respect to PEs given to dwarikesh etc yesterday … Since todays fall was universal so it doesnt stand true now …

Sugar production during the ensuing season of 2016-17 could be lower compared with the current year’s estimated output of 252 lakh MT due to drought that hit Maharashtra and Karnataka, Parliament was today informed.

Minister of State for Consumer Affairs, Food and Public Distribution C R Chaudhary, however, said there is sufficient sugar stock available in the current season to meet demand of 255 lakh MT and the government has already taken steps to prevent a price rise of the commodity.

“Due to drought in the states of Maharashtra and Karnataka there is possibility of decrease of in sugar production in the country during the ensuing sugar season 2016-17 as compared to estimated production of 252 lakh MT in the current season,” Chaudhary said in a written reply in Lok Sabha.

The minister, however, said it is too early to estimate the sugar production for season 2017-18 at this stage stating that sugar production during a particular season depends on a variety of factors, including area under cultivation, yield, drawal of cane for crushing by mills and recovery of sugar.

On the availability of sugar for the ongoing season, he said: “With an opening stock of 90 lakh MT and estimated production of 252 lakh MT, the availability of sugar in the current sugar seasons is sufficient to meet estimated demand of 255 lakh MT.” The minister further said in order to keep a check on rise in price of sugar, the government has imposed “stock holding and turnover limits on sugar”.

“Further, government has imposed custom duty at a rate of 20 per cent on export of sugar to conserve stocks in the country and ensure its availability,” Chaudhary said.

In reply to another query, the minister said due to surplus sugar production in the last five consecutive sugar seasons over domestic consumption and depressed sugar prices, the liquidity of sugar mills have been adversely affected leading to accumulation of cane price arrears to farmers.

“As onJuly 31, 2016, Rs 6,598 crore are outstanding against sugar mills for each of the last three years and the current year,” the minister added.

He said the Centre has taken several initiatives to help the sugar industry resolve liquidity problems and thereby facilitate clearance of cane price arrears to the farmers.

Incentive of Rs 483.87 crore on raw sugar export, interest free loans of Rs 6,420 crore under SEFASU, and notification of production subsidy at a rate of Rs 4.5 per quintal cane crushed to offset cane cost, are some of the measures taken up to support the sugar industry, he added.

5 Likes

Thanks Meetesh! That is quite a confusing information from Mr Chaudhary.

Let me get the accounts straight here. We have an opening stock of 90 Lakh MT( not sure as of what period, is it as today or as of SS2017(which is when crushing starts) or maybe it was mentioned in the source file ) and expected production of 252 lakh MT. Demand is 255 lakh MT. If we ignore the Opening stock then we a clear gap of 3 lakh MT.

No mill will get rid of its inventory completely. If this opening stock is as of 1st April 2016 then by the time crushing ends 75% of inventory will be gone. So is he trying to say India is going to live hand to mouth till fresh Sugar comes out? Wouldn’t this create panic in market when they get to knows mills are falling short of sugar?

The steps he is talking about are how mills are stopped from leaching public. And the benefits given to resolve the liquidity problem. We all know this Q1 sugar which mills have sold has been purely from inventory yet gross profit/net profit margin has not been great knowing that there is no mill run cost( open for debate)

To me this is even more confusing , should the share market be happy if mills are short of sugar?

I am all :confused:.

1 Like

Andhra sugar support is at 204
For DCM Sriram its 211 and 192
And Triveni and Bajaj Hind are much below their support levels…hence can be avoided for the time being

1 Like
2 Likes

Hai friends…
Anyone have ideas about Thiru Arooran sugars.
As my analysis this sugar company diluted its equity capital at very least in last ten years when compare with other listed sugar companies.
5% only diluted 10.75 become 11.32 cr equity capital.
Every bull market small cap stocks will fly high at the end of the bull rally.
so i assume it may touch or break it previous closing life high of Rs.560.
The MD is IIT graduate in chemical engineering at chennai.

First the sugar export subsidy was withdrawn…then 20% export duty on sugar was imposed…then the stock holding limits were imposed…and now trading of sugar futures has been stopped.

All this while, the Govt maintained that the sugar production though down for the coming sugar season will still be adequate to meet the countrys requirement.

Then there is a proposal to force the mills to sell more sugar and impose stock holding limits on sugar mills. The PMO has already ruled out the reintroduction of the earlier sugar release mechanism. So there is no way for the govt to force the mills to sell more stock…except through informal channels.

Secondly, there is already stock holding limit on traders, and if stock holding limits are imposed on mills, then the question arises as to who will hold the sugar?

All these steps indicate that the Govt wants it to be known that it is doing a lot to prevent rise in sugar prices.

On the other hand, market interprets these actions as…that the Govt is very very scared of sugar prices rising hugely. And the Govt fear is because the probabillity of very high sugar prices is very high.

The more the Govt tries…the more it gives rise to inflationary expectations in sugar sector.

10 Likes

Desparate govt moves::Soon the govt will ran out of weapons to control sugar prices and hence will ran out of sugar inventories too…govt showing short sightdness and will use all avalibale inevntory and then we will lookin at imports…
There forecast for 23mt for 2017 is surely gonna go for a toss…my estimate it will be below 22mt…and thats huge deficit…

Govt suspends Sugar trading Futures and impose stock holding limits at Mill level to curb price rise.
http://epaper.business-standard.com/bsepaper/svww_zoomart.php?Artname=20160811b_003101001&ileft=183&itop=42&zoomRatio=130&AN=20160811b_003101001

1 Like