Very difficult to pinpoint the exact outcome. But my understanding is , timely controlled imports are better than explosive shortages. Even for UP sugar mills a reasonably higher price is better than a uncontrolled situation where govt intervention will be very high.
A price around 39-41 will mean a sane cane price next season. A early, controlled import plan is in everybody’s interest.
SP Tulsian seems very bullish, some structural changes might be underway.
" But let me give you the fundamental news on the ground for this sugar season Maharashtra and Karnataka will be showing 42 percent lower production of sugar while UP will be showing a higher production of about 19-20 percent what they have produced in the previous season. UP has produced 68 lakh tonne in the previous season and now it is estimated that this season they will show a production of about 82 lakh tonne. The way situation is prevailing on the sugar I think that maybe April or May or maybe in the monthof May and June I won’t be surprised to see prices moving to a level of Rs 41-42. So, I am keeping a highly positive stance of the UP based sugar mill but won’t give any credence to the news that Prime Minister has promised to waive the sugarcane arrears. If that happens that will be seen positive for the cooperative sugar mill and not for the private sugar mills like Balrampur Chini."
Pl refer to my post in sept 2015 when every thing was sooo bleak fundamentally in the sugar sector …but at the same time the technicals turned around and thus the foundations of the present sugar rally were laid…
Now fundamentally the sugar sector has every thing going for it…but then the sugar price is showing extereme technical weakness…it is difficult to imagine now, as to why such bearishness is creeping in…both in the domestic sugar price and the international sugar price…just have a look at the chart below and compare it with the chart of sept 2015…
Hope that the sugar price starts turning around in the near future…otherwise…
If I were to interpret the chart in words it is safe to say that the price is rising but the momentum has slowed. Since the momentum has slowed it is showing in the below line chart. But as a Price action trader I will give more credence to the price which is still in uptrend bu all parameters. Indicators can fox at times and there is a clear divergence as you mentioned. Price action is still positive, fundamentals still intact, only problem is indicators (which apparently rank the last in terms of value). So not a clear cut buy/sell at this point…wait and watch…
it seems to be bleak in the North due to the ongoing crushing season and government pushing mills not to maintain any excess stocks in inventory as it want to keep the prices as stable as possible . The month of April /May should again see a spurt in the Sugar Prices making a dash to higher levels . This level will be crucial as the increase in prices may also lead to Government going into a panic import mode. Seems the future and fate of mills will depend on the policy of Import which Government follows. Talks of removing import duty is also on the cards. Another upmove is imminent in the runup to Q4 for sugar space in most probability unless the import is announced right now in the ongoing crushing season
Divergence means a creeping weakness developing in an upward moving stock price. That means, investors should sell when the price starts breaking down as a result of the weakness.
In case of sugar, the price has already started falling since last two weeks. If there is no sharp reversal in the next 1-3 weeks, then in implies that the present rally in sugar prices has ended. We then wait and watch…for a consolidation …or a continuation of price fall.
If sugar prices go into consolidation phase, then it implies a bout of weakness in sugar stock prices too…
So…hoping to see a sharp reversal in sugar prices in the next 1-3 weeks…
Can the expert boarders here put some light on the Upper Ganges ,Oudh Sugar Arrangement lately approved .
Seems UGS shareholders have got a better deal , but will it lead to value unlocking or erosion ?
What can be more bullish news than this?..if only the sugar price starts trending up…
El-Nino is returning and South east Asia will be affected. Consequently Thailand sugar production will be affected due to less rain between July to September. Read on.
But some sugar players say even 20+ number production this year is overstated. The opening stock 7+ could also be lower by 25-30%. That way we will be starting next year with zero opening stock. We can manage, if somehow a way is found to match the buyer and seller down to the last kilo of sugar available.
Its basically the demand and supply thing.Two years ago a surplus production of around 3 million tons of sugar caused the sugar prices to collapse to 24 rupees per kg.
Now this is the second year of drought and the sugar deficit is around 5 million tons. Still the govt refuses to reduce the import duty on sugar. It showed the same attitude when there was collapse of sugar price.
The Austrian school of economics, tells us that in such cases where artifical efforts are made to distort the demand supply cycle, the effects are greatly magnified.
Let the govt not allow sugar imports now…the mills too will play along for sometime by not increasing the sugar price and summer demand will keep eating away the sugar iinventory. But thats almost a guarantee that the sugar prices will definitely explode to thr sky from Q2 onwards.
Balramour had booked quite a bit of loss in last Q4…hence the coming Q4 number frim Balrampur will be very spectacular. While the other sugar mills may write down the off season expenses, and also book govt dues under litigation to show modest profits…there is no holding back Balrampur results.
So my investment choice for the next round of sugar rally…whenever it happens…will be Balrampur.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: If our viewers had heard you yesterday, you had recommended to buy sugar stocks. You expected a second half surge today. That is what we are seeing right now. Explain to us what is leading to this surge and whether any stocks can be bought at current prices as well?
A: Yesterday in fact, I have said that on 17th, Indian Sugar Mills Association (ISMA) will be releasing their production report. But that has not been out on ISMA site as yet because I checked it about maybe 3-4 minutes back and yesterday I have specifically said that on every 17th and 2nd ISMA releases the production figure and if you recall ISMA have been continuously reducing the production target of sugar from 234 lakh tonne to 213 lakh and now reduced to 203 lakh tonnes. While I have maintained a production target of not more than 193 lakh tonne for this season.
So, probably this is going to be the scenario going forward. Maybe ISMA report must be getting released in a while or so, but if you really see the situation prevailing on the ground, it is so precarious that the sugar production is seen down in Maharashtra and Karnataka by about 40 percent or maybe to be precise maybe 42 percent while I Tamil Nadu, it is down by about 33 percent. The Uttar Pradesh is the only sugar producing state which will be showing a production growth from 68 lakh tonne which they have produced last year to about 84-85 lakh tonne. That means the eventual production growth will be 20 percent. So if that is the scenario and if you see Rs 37 as the ex-mill price, the choice is obvious and there is no need to apply the mind that go for all the UP based sugar mills.
Now the question comes that which all needs to be looked into. So, amongst the UP also, the companies which are going to exceed the 20 percent estimated increase in the production of UP state, those companies should be looked into. And in that category, what I have on the ground report that Triveni Engineering and Industries will be producing about 24 percent higher sugar production. Last season they had produced 48.5 lakh bags and this season they will be producing about 61-62 lakh bags. Second is in terms of the production and I request every viewer to take a note of this that the incremental production to be shown by each company is very relevant.
Second will be the Dhampur Sugar Mills, third will be Dwarikesh Industries, and fourth will be Dalmia Bharat Sugar and Industries. So, what my advice is that look for only UP based sugar mills and those who will be exceeding the production by more than 18-20 percent over last seasons production. So, these are the four choices which I am advising now, Triveni, Dhampur, Dwarikesh and Dalmia as of now. I am not saying that the other stocks are not good, but Balrampur Chini may be showing a growth of about 13-14 percent production only over last year because the situation has not been seen that good in the eastern UP where Balrampur Chini is having a presence.
So, my advice is that yes, keep a bullish view. Again probably on April 2, when the production report for March will be released you will see the same kind of renewed interest getting revived in the sugar stocks again.
Govt mulling to cut import duty.
http://epaperbeta.timesofindia.com/Article.aspx?eid=31818&articlexml=Import-Duty-on-Sugar-may-be-Cut-from-24032017012016
UP based Sugar Mills are selling large volumes at reduced profir to help Govt to maintain supplies and price level.