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

Hello Everyone,
A related question to what @nil_71 asked.
How many kg of sugar is “generally” obtained from a quintal of sugar cane?

I could be wrong here but i think it takes about 100 kg of sugarcane to produce 1 kG of sugar. Storing sugarcane also reduces output.

Recovery rate is now around 11%…thus from 100 kgs of sugarcane, mills are able to extract 11 kgs of sugar…

…dont judge the wisdom of the sugar mulls too harshly…they have been around for decades…they have seen a lot of cycles…they know how to survive…even the farmers are not foolish…they wont kill the goose that lays golden eggs…

A SAP of 360 would imply an immediate collapse of almost all the big debt laden sugar mills such as Bajaj, Mawana, Simbhaoli, Oudh, Modi etc…thats the surest way for Akhilesh govt to lose the elections…if 50% of crushing capacity collapses, then what will happen to the sugarcane…

Ofcourse outrageous demands will be made and ofcourse mills will give doomsday scenario…but what finally emerges is something which is nit quite so bad.

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Last Year it was 280 in UP. I feel, it may go up to 300-310 level. Not sure how cost effective that will be

A good read on the following

  1. Current sugar situation and the expected directions
  2. Sugar SAP
  3. Recent history about sugar industry
  4. Govt’s actions/ interventions

PS: First few paragraphs talk about wheat !

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Pretty Insightful article of IE. That means ISMA is already pricing for 300-310 per quintal and they will put enough pressures to keep below 300. Thanks Sudeep for sharing it. I feel govt may loosen the strings after 31st Oct. allowing to Sugar to be sold a little higher and keep all stakeholders happy

There is also a warning that if the SAP is raised much higher, the sugarcane arrears will start piling from Jan / feb onwards and may harm the prospects of Samajwadi party in May 2017 elections.

In an earlier interview, Tarun Sawhney of Triveni engg too warned of arrears building up in case the SAP is hugely increased.

I think Farmers will ask for 340-360 while sugar mills will object to above 300…but the SAP will be announced around 320 levels…and then SP, Congress and RLD will start blaming BJP for artificially supressing sugar prices and harming farmers.

Thus two things may happen in near future…Rise in SAP and Centre allowing sugar prices to go to around 45 rupees…this way both the parties will claim credit…SP for rising SAP and BJP for solving sugarcane sector problem by ethanol blending and export subsidy…which earlier govts failed to do…

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Here comes 2nd downgrade from IMD on monsoon 1st from surplus to normal …
now below average from normal.
Also sugarcane sowing as i updated in down by 8% so sugar cycle to get stronger n stronger now.

IMD shifts from earlier predictions of surplus rain, says India could record below average rainfall

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Farmers problem is payment of arrears not price of cane. In Uttarakhand farmers did not sow cane as protest for payment.
All this noise of increasing SAP is from politicos and media only.
I am farmer also from UP & Uttarakhand. Farmers are too happy with the same price if payments are on time.
Farmers have evolved new agrotech to double the yield in UP. Now this new agrotech is gaining ground.

Sugar is the only crop where sowing area is down. Got it from twitter. Veracity not known

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Sorry Cotton too is down

Guys, Dhampur is showing good buying support and indicators on daily charts too have turned up…it appears that Dhampur may be among the first to run in this leg of the sugar rally…those interested in investing in Dhampur may keep a close watch on it.

Disclosure: my sugar potfolio is skewed towards Dhampur …therefore, my views on Dhampur may have bullish bias.

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Dear Mehnaz- Have selected Dhampur, Dwarikesh and Balrampur for investment. Typically What % would you advice to allocate towards the Sugar Trade over the next 12 Months? Thanks for your deep insights within the sector, it’s been greatly helpful. Regards.

currently UP SAP is at 280

The problem Mehnaz is there is lot of money sugar mills earn outside balance sheets. If you remember, in the last upcycle also, there was significant jump from Rs 240 per quintal to Rs 280 per quintal in 2012-13 when sugar prices were at around Rs 30. The sugar prices crashed post that but SAP remained at 280. No sugar mill closed in this period since these mill owners earn lot of money from these mills which is largely unaccounted (how they do it is an topic of another conversation but everybody who knows how mills operate is fully aware of this). So even if SAP goes up to 350, no mill is going to get close. Owners will raise hue and cry and will report huge losses in balance sheets leading to collapse in share prices but will not close down the mills since it would still be a money generating machine for them.

Sugar Situation update. Icra rating agency says sugar prices will firm up despite all govt curbs.

.http://epaperbeta.timesofindia.com/Article.aspx?eid=31817&articlexml=Stock-Limits-may-Not-Curb-Spiralling-Sugar-Prices-16092016014036

few of the informative articles:

http://economictimes.indiatimes.com/markets/stocks/news/domestic-sugar-prices-likely-to-remain-firm-for-next-one-year/articleshow/54347449.cms

Tarunji: you can divided you investment equally between the three Dhampur, Balrampur and Dwarikesh…so as to avoid a Ugar like situation which had a series of lower circuits trapping the investors.

Technically, Dhampur has made a good bottom…followed by Dwarikesh. Balrampur too is getting support around 102…and will turn bullish once it goes above 109…

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Dgoelji: i am expecting a SAP of around 320…and the announcement will be in mid to end Nov…given the pilitical situation in UP…that gives the stocks a good 4-6 weeks to rally over rising sugar prices.

In Q1 the sugar price realization was around 34…in Q2 it should be around 36…and in Q3 it should be around 37 - 38 rupees

Fatimaji your guess is similar to yours as far as SAP for sugarcane goes however i hope that they announce fixed SAP of around Rs 305 and variable components linked with sugar prices of around Rs 20 which can satisfy both farmer and sugar mills lobby. Mr Vivek Sarongi of Balrampur already hinted about this scenario in concall saying some kind of dynamic linked pricing can be possible and he must have best insight about these scenarios among all mills owners. However political leaders to win votes can go to any extend so nothing can be ruled out but considering UP state govt supportive stand towards sugar mills SAP of more than Rs 325 is unlikely however central govt may increase FRP for next season to Rs 260-270 range from current Rs 230 and this annoucement also likely soon before UP election annoucement in anycase so that both can influence farmer votes during elections by making claims and before UP election due to political reasons govt not likely to allow sugar import so prices remain supportive in domestic market atleast till that point. From last 2-3 months even after so many negative news sugar stocks showing good strength since last few weeks which is a good sign for near term support.

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