India Sugar Cycle

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Indian sugar Cycle
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  Sugar Productionin Million tons18.5 18.520.113.512.719.328.426.414.518.924.42625.1 250510152025302000-012001-022002-032003-042004-052005-062006-072007-082008-092009-102010-112011-122012-132013-14 *(E) Indian Sugar Cycle Indian sugar price cycle follows the production cycle which depends on the  Sugarcane acreage  Favorable weather/rainfall conditions  Cane pricing and switchover crops  Government policies Indian sugar production per million tons from 2000-01, *2013 – 2014 estimated figure Typically Indian sugar production cycle follows 2 to 3 years of high production and 2to 3 years of low production cycle. Factor that mostly influences the production is thesugarcane acreage which depends on the price which the mills are paying thefarmers. Generally higher production leads to surplus stocks and the lower marketprice, which in turn makes the farmers to lower the cane acreage which turns out tobe a lower production cycle and the higher price in the market.  Sugar Futures Price/Quintal 1000150020002500300035004000   A  u  g  -  0   7  D  e  c -  0   7  A  p  r -  0  8  A  u  g  -  0  8  D  e  c -  0  8  A  p  r -  0  9  A  u  g  -  0  9  D  e  c -  0  9  A  p  r -  1  0  A  u  g  -  1  0  D  e  c -  1  0  A  p  r -  1  1  A  u  g  -  1  1  D  e  c -  1  1  A  p  r -  1  2  A  u  g  -  1  2  D  e  c -  1  2  A  p  r -  1  3  A  u  g  -  1  3  D  e  c -  1  3  Where are we in the cycle now?  With the last year surplus of 8mnt, with an estimation of higherproduction current year, supply is more than the demand; prices will below  We are at the bottom of the cycle as the farmers are not getting a gooddeal for the cane this will lead to migrate to other crops. o Excess stock will depleted, with a increase in price o Based on the price increase farmers will return to cane planting, cropcycle begins o Sowing of crop start from January to March and the new crop will beready to harvest in 12-14 months. NCDEX futures market price from August 2007 till date Last three consecutive year of surplus production kept the sugar price below 3000Rs/quintal on an average, based on the 2012 – 2013 season excess closing stockand the coming season’s estimated surplus production will extend the weakness insugar.  International Raw Sugar price in $ 5101520253035   N  o  v -  0  3  M  a  y -  0  4  N  o  v -  0  4  M  a  y -  0  5  N  o  v -  0  5  M  a  y -  0  6  N  o  v -  0  6  M  a  y -  0   7  N  o  v -  0   7  M  a  y -  0  8  N  o  v -  0  8  M  a  y -  0  9  N  o  v -  0  9  M  a  y -  1  0  N  o  v -  1  0  M  a  y -  1  1  N  o  v -  1  1  M  a  y -  1  2  N  o  v -  1  2  M  a  y -  1  3  N  o  v -  1  3 International raw sugar price from November 2003 till dateIn India 90% of the sugar produced is consumed locally, this would have a lessercorrelated cycle with the international market as the countries like Brazil, Thailandand others export most of the sugar produced. Also, earlier India was holding 10%buffer stock as a cover incase of deficiency. Now, after the decontrol the sales side isopened up completely and as result, a slight swing in the production on the eitherside will have a major impact on the price, this will make the domestic cycle to alignitself to the overall global cycle.***** *****
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