The global sugar market has started showing signs of improvement after a long-lasting blow from the covid-19 pandemic. However there are yet some underscoring concerns that are eyed around the world. In talks with ChiniMandi News, Indian Sugar Industry Guru – Mr. Yatin Wadhwana – Director, Gradient Commercial Pvt. Ltd. shared his views on some of them.
Speaking on how he sees the global sugar scenario and the price trend in the coming days he shared, “Apart from the main issue of the COVID-19 Pandemic which has impacted Sugar consumption, Crude Oil Prices and Production (in some areas), there are many other factors which have been affecting the World Sugar Market.
Quite unrelated to the Pandemic is the continued impact of low Rains in Thailand, who’s Crop for 2020-21 has been downgraded to about 65 mln MT crush v/s an already reduced crop during 2019-20. Similarly we have seen the effects of weather on the EU crop for the 2020-21 season, with production numbers being reduced.
On the other hand, Brazil has been maximizing their Sugar production v/s Ethanol due to the low Crude Oil Price and the Weaker Real. This has meant that a single origin (Brazil) has become the only source of sugar for the world market which is not healthy for any market.
Of course, the elephant in the room is the huge projected crop in India and the decision of the Indian Govt. to incentivize the export of the surplus. Although the market has been expecting the Indian Govt. to announce an Export Policy and an incentive, for more than 4 weeks no such announcement has come which has been one of the main factors which has been driving world sugar prices.
So, looking forward, my personal view is that as long as there is no announcement from India the global sugar market will continue to rally up to a point where consumption starts to take a hit or Indian sugar can come out without any Govt. assistance.”
Answering on whether the delay in export policy of India will redirect demand to Brazil he said, “For the moment, any further delay in announcing the Indian Export Policy will divert demand away from India to not only Brazil, but also to the Coastal Refiners in India and the Sugar Refineries in the Region (for White Sugar).”
In a recent virtual conference there was a statement, “India could be the ‘Black Swan’ if there is difficulty with the export policy or it is delayed as it is right now.” Commenting on the same, he said, “Indeed the Indian Export policy announcement (or the lack of it) will be treated as a “Black Swan” event, as for the last 2 years the Indian Govt. has been announcing its Export Policy well in time for the commencement of the new crop and the elements of the policy have been fairly consistent so the market had been expecting a similar move this year.
In the event that India delays or does not announce an Export Policy the World market will rally to a point where Indian Sugar exports become viable without incentives. But one must remember that Indian Domestic prices will also breach the Minimum Selling Price (MSP) levels set by the Govt. as it will become increasingly difficult for the Indian sugar mills to store and finance the excess sugar produced, which will mean that export parity levels will also be lowered.”
On being asked what price level will India be able to export if there is no assistance for sugar exports, he answered, “If we take the current domestic MSP price i.e. ₹3100/Qntl and assume that it is the breakeven level for the Mills to Export, then the FOB values for Indian White Sugar should be around USD 450 PMT. However, as I mentioned before the Domestic MSP is likely to be breached due to the large stock levels, in addition the sugar mills will also look at cash flow and interest implications to arrive at export values. So, one can be very sure that Indian White sugar will be offered at much lower levels to the $450.”
Suggesting on what steps the Govt. needs to take for the sugar industry given the need of the hour, “The Govt. has made an excellent beginning with implementing the Ethanol Blending Programme where all the excess Sucrose is diverted to Ethanol by incentivizing its production from Cane Juice and “B” Heavy Molasses, however, given the financial health of the Sugar sector in general it will take some time for the production capacities to be built up and until such time the Govt. needs to continue its policy of Export incentives on sugar to enable the Industry to liquidate their stocks and pay their cane dues.” Wadhwana said.
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