Recently, the 11-year high price has dropped by 27 cents a pound in raw sugar. According to experts, analysts and traders the price of sugar could remain range bound.
At an Intercontinental Exchange in New York, it is said that wet weather in Brazil is boosting sugar prices. Raw Sugar Futures, dropped nearly 5% last week and CMP is 25.10 pounds. (45,700 INR Per Tonne).
Brazil is building up its strength
On the global platform Brazil is doing crucial things by diverting from ethanol to sugar, UNICA said Brazilian sugar mills are now 165 units as per count which is 80 units more now compared to 84 units of last year.
Sugarcane crushing was nearby expectations. It was around 13.6 Million Tonnes (MT) as per UNICA (The Brazil Sugarcane Industry Association)
“Brazil is currently diverting more cane for sugar than ethanol. It has pulled down prices and supplies are expected to improve,” said Praful Vithalani, Chairman, All India Sugar Traders Association.
Other countries are disappointing
On the other hand, the production was less than expected in countries like Thailand, India, China and European Union.
India is diverting its production more towards ethanol – said Fitch Solutions Country Risk and Industry Research, a Fitch Group unit. This in return supports the prices of sugar in India.
Unexpected rain in India overwhelmed the crops products and caused more damage including sugarcane in the month of October in the states of Maharashtra and Karnataka. India’s sugar production was estimated at 36.5 mt but now it is estimated at about 32.5 mt. Last year, it was 35.8 mt as per records.
As said earlier, crops in Brazil are as per expectation but in other countries it is disappointing. UK-based Marex group, a diversified global financial services platform also ad minds the same.
Brazil has not provided “enough relief” and supply remains tight. “There are severe risks that it will get tighter – if El Nino comes, or logistics play havoc with Brazilian sugar shipments,” it said in its weekly report in the first week of April.
Is this a temporary scenario?
All these scenarios can be considered as temporary if the conditions are satisfied. One, a slight rise in price, and two, weather becomes normal. The earlier condition is man-made, it is reflecting the balanced market and the other condition is natural on which no one has control.
A statement by Rahil Shaikh (M.D. at MEIR Commodities India Pvt Ltd) also gives some relief that, if the supply of sugar is diverted to ethanol production then the supply and demand of sugarcane can be matched.
If, again a condition, there would be a change in domestic prices across the world that can stimulate production. India is having very low stock, it might not even be able to export 6 mt next season as compared to this season’s export i.e. Oct 22. to Sep 23. because of diversion to ethanol and increased demand – said Marex.
Some hope for relief in India
On the contrary, Indian experts in industries are of the opinion that it is too early to predict anything about the production for next season. Like, Indian Sugar Mill Association President – Aditya Jhunjhunwala and Vitlani is having their opinion on the positive side.
“India’s domestic consumption could be 27.5 mt and diversion to ethanol could be 5 mt. So any exports will be allowed over and above 32.5 mt,” Jhunjhunwala said.
Unless the production of sugar is clear to Central Government it might wait for exports for next season. “The government could take its time to assess the production and permit exports in January,” – said Rahil Sheikh.
Thailand and UK are at “hike”
Thailand was having some shortfall of rain from November and also the prices for cassava were very high which may lead to lower sugarcane acreage – said Marex
The UK-based firm said new production will arrive after one and half year because new plating will be started in the southern hemisphere only. In Northside at this time planting cannot be increased.