◾ NEW INDIAN CROP LEADS TO BEARISH MARKET
As the Indian Sugar Mills start crushing the 2020-21 crop, which is expected to be huge, it seems as though they have begun a race to the bottom in terms of domestic prices in the absence of any indication from the Government on the announcement of incentives for Export. As of mid-November 2020, India had produced about 1.4 million MT of Sugar, which is about three times what was produced during the previous crop at the same time.
With the pressure on Mills and Sugar Financiers (who had stepped in to fund the weaker mills) to monetise their Sugar, supplies have increased and prices have breached the Minimum Selling Price (MSP) of ₹31,000 per MT ex – Mill, touching a low of ₹30,010 per MT ex-Mill. In such a scenario had there been an Export Incentive Policy in place to evacuate even 5 million MT the situation would have been very different.
The question now is how much further will the Domestic prices fall once the production is in full flow, and when will the Govt. step in to stem this drop? Or will the domestic prices fall low enough for exports to commence unaided?
In the ultimate analysis with low domestic prices, all the sugar mills will face difficulties in paying their cane dues leading to mounting cane arrears to the farmers. Will the Government of India allow this to happen?
◾ WORLD MARKET REMAINS FIRM IN THE ABSENCE OF INDIA
Having anticipated incentivized Exports of 6 million MT from India, the World market has rallied due the delay in the announcement of an Export Incentive Policy. One can see the nervousness in the market with every little rumour coming out of India causing the market to drop or rally by $8 to $10 per MT. Although there are other contributing factors, for the past 4 weeks the Market has been driven by Indian Policy news, or the lack of it.
◾ SUGAR TRADE – WAITING FOR GODOT
The Sugar Trade must feel like Estragon and Vladimir the two protagonists in the Samuel Beckett authored play, “Waiting for Godot”. Like the illusive Godot the Export Incentive Policy is eagerly awaited by the World Sugar Trade and the Indian Sugar Industry. However, unlike Godot we might actually see an Export Policy as the alternative could be unimaginable for the Indian Sugar Economy.
Indian Sugar Industry Guru – Mr. Yatin Wadhwana is a strategic consultant and trader with over 35 years of experience. He is Director at Gradient Commercial Pvt. Ltd. which undertakes strategic trades, consultancy and advisory roles. Apart from sugar, he has also been involved in Supply Chain Management, Logistics and the trade of other agri-commodities including wheat, rice and soybean.
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