ET Now: After many quarters sugar companies are reporting profits. Do you think they will remain better only for a short time with UP elections round the corner?
Vivek Saraogi: The demand-supply trajectory would cause sugar prices to remain firm. I do not see the prices rallying up from here. I do not see UP Government taking an irrational political decision in raising the cane price without recognising the quantum they should raise based on the sugar price rise. If UP Government raise the cane price, they will have some kind of mapping with the sugar price rise.
ET Now: What’s your outlook on this year’s demand-supply situation? What is the production level and what will happen this time in the crushing season?
Vivek Saraogi: The production is about 252 lakh tonnes in the season that concluded now. After exports and domestic consumption, the stock should be about 70 lakh tonnes. Next year, based on initial satellite imaging, the production would be 230 lakh tonnes and with the 70 lakh tonnes opening stock there will be a total stock of 300 lakh tonnes. If we put next year’s consumption at 255-257 lakh tonnes, we have closing stock of 40 lakh tonnes. This means stock as on 1st October is probably not enough for two months. But we must not forget that in the last five years the average production during October and November has been about 20 lakh tonnes, so we may have enough stocks.
ET Now: Do you see sugar price stabilising?
Vivek Saraogi: That would be probably in this range, maybe 50 paisa lower. I do not see either a breakdown or surge in the sugar prices. It may be 2-3% up or down.
ET Now: The global scenario for commodities is very interesting. Every commodity is in an epic bear market, but for sugar the trajectory is very different. Do you think the demand-supply scenario globally is also favourable?
Vivek Saraogi: If I try to predict the price trend globally, it is about 19.5 cents. Again, one is not looking at very volatility there, 18 cents and maybe 21 cents. The main reason being Brazil still would continue to supply. There should be a plus sign which means the production will be higher than this year. Therefore, there is no global shortage. Global surpluses have come off significantly, and prices would remain on a firmer ground.
ET Now: Could you please tell us about festive season demand?
Vivek Saraogi: When we talk about demand, we are factoring in the seasonality also. It is a sale round the year, and it has followed a trajectory resembling the past years. There will be enough sugar for the festive season and no price rise is expected.
ET Now: Are the happy days here to stay?
Vivek Saraogi: Government of India has created a self funding mechanism. It raised the cess in the month of February, and this money is going to a specialised Sugar Development Fund (SDF). If there is a surplus as was created last year, the government can use this fund to export that surplus. Sugar prices fall because of excess stocks. Also the government’s decision to fix the price for ethanol used doping in petrol is very pragmatic. The only concern is about cane price in an election year from UP. If you take last few years, one year they gave about Rs 40 which is more than Rs 3000 crores, last year they gave tax rebates of about Rs 700 crores. Governments have realised that cane price payment is more important than cane price announcement. One is a price which is printed on a ticket, one is the price which reaches the farmers bank. I think the difference has been recognised even by the UP government. So we hope for a much more pragmatic cane pricing on that end. That is the reason I feel that we would have a far more sustainable earning and model as we move ahead.
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Demand-supply dynamics will keep sugar prices stable: Vivek Saraogi, MD of Balrampur Chini have 1557 words, post on economictimes.indiatimes.com at August 12, 2016. This is cached page on USA Breaking News. If you want remove this page, please contact us.