Price trend for November 2020 – Our Opinion
Historically, we understand that the sugar prices dip down as the mills begin sugar crushing. It is in interest of the millers as they want to finish off old inventory in order to make storage for the new inventory. Sugar production forecast for the year 2020-2021 is 31+ million tons, and after the diversion of sugar to ethanol, India is entering into a surplus year, which is not a positive news for the industry. It’s not a positive news for two reasons primarily, first being the surplus year and most importantly the second, Indian government now is not considering to give any sort of export subsidy, which worries the sugar millers. Ethanol diversion is not appreciable as the number for production is not going to see any huge impact, but it may, year on year, in future.
Since, so far there’s no support from the government in terms of subsidizing exports or increasing the MSP, the monetary burden will pertain to domestic sugar prices. The demand for sugar is estimated to weaken post the festivities, as there’ll be a slow down in consumption from the institutional buyers after Diwali passes.
Having seen all the downsides, let’s have a look at the possible upsides. As Indian sugar industry is not liberal, which means sugar being a regulated commodity, the government decides the prices of sugarcane, sugar and ethanol to manage it’s sale. The government may intervene anytime and may introduce a hike in MSP at Rs. 33 per kg or may give some sort of financial assistance for exports in form of subsidy or otherwise. It could be a probable upside, if the government decides to take steps in this direction, if not, the situation will persist; domestic prices will collapse.
The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.chinimandi.com
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