Sugar Industry

Hi aLL

Just need your opinion on what would be the future of Sugar Industries?

Thanks in advance

Aravind

hy

I think suger ind.has bottemed out and now bottomfishing in quality shares, we can see.So i am very much positive on sugar sector specially Bajaj hindustan and other large caps

vishal jain
good-luck

Market Matrix: Current Sugar Sector scenario - 24 Feb 2007

By Sharad Khandelwal - A Stock Market Vedic Theory analyst

The fall in the price of sugar over the last few months is almost drastic. The glut of sugar in the market is the reason behind this. While production this year is expected to grow to around 23 million tonnes from 19 million tonnes last year, consumption has more or less remained the same, staying around 19 million tonnes. Sugar prices go through alternating periods of sustained rise and fall as part of the 4-5 year sugar cycle. It is expected prices to stay at these unremunerative and loss making levels for one and a half years. In the space of 3 months, the price of sugar has dropped from around Rs.1800 per quintal to around Rs. 1400 per quintal. Of the 470 factories in India, not even one is able to make a profit.

The sugarcane farmers will ultimately feel the impact of the fall in prices. As mills run into losses, the payments to farmers will be delayed. Cane planting will go down, and crop patterns will change with farmers shifting to other crops resulting in decreased availability of sugar and the onset of the next stage of the cycle.

The biggest swing factor when it comes to global sugar prices are Brazil's production levels. The sugarcane crop in Brazil is 7% higher than last year, and as prices of crude oil fall, factories in Brazil are shifting from the production of the alternative fuel ethanol to sugar resulting in a well-supplied global market.

India has a fragmented farmer structure, while abroad there is a (more consolidated) factory farming structure. We can not match their competitiveness in the market. The introduction of export subsidies could help increase India's competitiveness.

While the prices of sugar are cyclical, there are fixed prices for ethanol and power, these investments would help in diversifying the income base of good sugar companies. The distillation and power profits are being eaten up with present low sugar prices.Therefore, sugar scrips are likely to remain under pressure and would make a surge only if crude and sugar prices firm up both in national and international market.The decision to create buffer stock of 2 million tonnes and export subsidy to help sugar stocks from free fall. Book profit in case you have bought lower.

Hari Om

BIRDINFO Stock Rx - A Vedic Prescription for stock market

Hi,

Yes, all the sugars have been almost bottomed out by more than 50%. Bottom fishing is good but at the right time, definately we will see an upside in some time.

We need to look out the fundemental news from the govt, and it will give a steep climb.

rAJ

Hi Raj

Great to see you posting after a long time. welcome back to the forum .

Te fundamental sory for sugar is not really good. The recent export subsidy and buffer stock are measures which will not help the Industry much as the supply far out weighs the demand. Also the export front does not look very good as the Brazilian sugar will hit the the market by july. So we may see a bounce in the sugar stocks which is expected to be shortlived. The leaders Bajaj and Balrampur has already broken out of the long term trend channels. So we can look for a short bounce in the frontlin sugar stocks

regards

Karthik

hello. sugar industry is a very volatile industry . its oversensitive. too many factors control its growth. international markets, rain god, politicians and many more. it is a seasonal product and a risky business.At the current prices many of the sugar stocks look attaractive and in the long term can be beneficial but i doubt that.If you are not a very long term player and are not worried about short term fluctuations, dont mess with them. but if u can hold for 2 - 3 years. then u have hidden gold in these stocks. once realized you can double ur money.

Sugar Incentives - A positive move in the short term

Government support for the sector positive in the short term

Government has reportedly announced a series of measures to provide short term support to the sugar industry. These measures include:

A subsidy of Rs1.35/kg for coastal states like Maharashtra, Tamil Nadu, Ka rnataka and Gujarat while a subsidy of Rs1.45/kg for north based mills.

Creation of a buffer stock of about 2mn tons

With an estimated sugar inventory of about 8mn tons by September 2007, the buffer stock would lower the cost of holding for the companies which would be borne by the government.

Beneficiary Companies
Companies with sizable re-export obligations are expected to take advantage subsidy schemes to partially liquidate their inventories accumulated as a result of bumper cane crop in the current seasons.

For instance, Sakthi Sugars, one of the largest exporters, has an obligation under the Advance License Scheme (ALS) of about 200,000MT to be exported by December 2007. The a verage import price of raw sugar was about US$200/ton while the company expects export realizations of about US$310/ton which would translate into domestic price of Rs13.2/kg which, coupled with the export subsidy of about Rs1.35/kg, would lead to net export realization of about Rs14.5/kg

No Impact On Larger Players
Larger sugar companies like Bajaj Hindustan, Balrampur Chini Mills and Triveni Engineering and Industries do no t have any obligation under ALS hence would remain unaffected by any such scheme. These companies may, however, look at fresh exports if domestic prices tumble further since this would help them liquidate mounting stocks albeit at lower international realizations.