EXPORT CONTRACTS CROSS THE 2 MILLION MT MARK BUT LOGISTICS REMAINS A CHALLENGE
While the amount of sugar contracted for exports has crossed the 2 million MT mark, the physical movement of sugar is slow. The main reason is that Raw Sugar (which has been the major component of the sales has been sold for shipments upto May 2021, hence some of that sugar will move in the ensuing months. On the other hand White sugar sales have been slow and are facing problems of availability of containers at the Ports in the Post-COVID scenario. Currently sugar competes with Rice and Soya Meal for an already depleted container supply causing major challenges for the exporters. The Shipping Lines do not have enough Empties in position and on top of that vessels are skipping their calls at some Indian Ports. As mentioned in my previous comment the container situation will take another 3-4 months to get resolved, until such time demand for Indian Sugar in containers will remain subdued despite the attractive price offered on the Low Quality Whites.
The World market continues to remain in a range with the front months at a substantial premium to the forward months mainly on the back of a lower Thai crop and logistics issues with Indian exports combined with potential new demand coming from non-traditional buyers like Pakistan.
INDIAN GOVT. GETTING SERIOUS ON MINIMUM SALE PRICE (MSP)
The Quota for Domestic Sales for the month of Feb 2021 was announced at 1.7 million MT, which is 300 kMT less than Jan 2021 and 300 kMT less than the quota given in Feb 2020. All of this in an effort to support the market and to get the Mills to sell their sugar at the mandated Minimum Sale Price (MSP) of Rs 31,000 PMT ex-Mill. The domestic prices had touched a low of Rs 29,000 PMT ex-Mill by the end of Jan 2021 and have since rallied by about Rs 500-600 PMT, but have given up some of those gains in the last couple of days as Mills continue to liquidate stocks to help their cash flows. The lower release was followed up by yet another missive from the Govt. to the various State Govt.’s and the Mills to strictly adhere to the MSP and Domestic Stock limit regime or to face consequences. In my personal opinion the prices will remain under pressure for at least another fortnight until the crush continues in full swing after which the prices will gradually gravitate to the MSP in the following 4 to 6 weeks.
PRODUCTION CONTINUES AT A GOOD CLIP BUT ARE THERE SIGNS OF A SLOW DOWN?
By the end of Jan 2021 India had produced 17.68 million MT of sugar against 14.10 million MT on the same date in 2020, an increase of 25%, which looks great on paper, but I am hearing that at least 1 mill in North Karnataka has shut for the season and that Mills in some areas of Maharashtra will start shutting as early as Mid-Feb, which is at least 1 month earlier than the original estimates. The main reasons being cited for the early closure is lower yields (due to water stagnation during the monsoon) and heavy diversion of cane to Seed (new planting). Could this mean a slightly lower production this year with an even larger production next year? I am also hearing that the production in Central & East UP and Bihar has been impacted due to lower filed yields and sugar recovery (Disease-Red Rot), which could reduce the production estimate for UP & Bihar.
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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.
To get in touch with Mr.Yatin Wadhwana write on yatinwadhwana@gradient.biz
