Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sugar: Bitter taste - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 23, 2009

    Sugar: Bitter taste

    With the impact of drought on sugar crops in India, the price of small grade sugar in Mumbai reached Rs 3,000 per quintal on 22 August 2009, an increase of 59% YoY. According to experts, sugar prices are expected to climb further due to festival season demand. While India consumes about 23 million tonnes of sugar a year, the production for year ending September 2009 stands at only 15 million tonnes. For the next year, output is seen at 16-17 million tonnes.

    The situation is all the more worrying because we are facing a global shortage as well. The global supply deficit may be 10.4 m tonnes in this year through September as excessive rain hampered harvesting in Brazil, the biggest sugar producer in the world. For the year 2009-10, international sugar shortfall is seen at 11 m tonnes according to the International Sugar Organization.

    Steps taken by the government
    The Indian government has taken various measures to control the rising prices of the commodity. To ensure that sugar is available to the common man the government has increased the levy sugar from 10% to 20% of total production. The levy sugar is sugar which is available to the government from mills for distributing through the public distribution system.

    Further, the government has imposed stock limits on big sugar consumers, wholesale traders and retailers. According to a recent government notification, bulk consumers whose monthly average consumption is over 10 quintals cannot stock more than 15 days requirement. This limit is valid for a period of six months. The government has also ordered the mill owners to sell half of their monthly saleable or non-levy quota every fortnight. Non-levy, or free-sale sugar, is sold by mill owners in the open market, but the quantity each mill can sell is fixed by the government on a monthly basis. Earlier, mill owners were allowed to sell the entire monthly quota anytime in the month, but from September 2009 the government has made it mandatory for them to sell half the monthly quota in a fortnight. The government also increased the deadline for import of duty-free white and raw sugar to November 2009 and March 2010 respectively. Further, the government has banned trading of sugar futures to curb speculation.

    Effects of the steps taken by the government
    Although the price of sugar has corrected in the last few days, with the increase in levy sugar, the mill owners have started feeling the pinch. This is because they are buying raw sugar from global markets at open market rates and selling part of it at subsidised rates. Due to the 15 days rule, companies which had a large holding of sugar are busy selling it while at the same time buying more expensive imported sugar.

    What we expect?
    With the festive season reaching its peak in the coming month, we expect the sugar prices to rise still further. We are concerned about food companies facing rising cost of raw material especially when these companies are unable to hedge with trading of sugar futures banned. We are also concerned about sugar companies as they are selling more sugar at subsidised rates. Moreover, there is concern that the recovery rate for juice from sugar cane will be low the coming year due to sub-par monsoons resulting in higher cost for sugar companies.



    Equitymaster requests your view! Post a comment on "Sugar: Bitter taste". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    ITC: Demonetisation woes pull down business growth (Quarterly Results Update - Detailed)

    Feb 8, 2017

    ITC Ltd has announced third quarter results of the financial year 2016-2017 (3QFY17). The company has reported 4.7% YoY and 5.7% YoY growth in revenues and net profits respectively. Here is our analysis of the results.

    ITC: A Decent Quarter Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Dec 7, 2016

    ITC has announced second quarter results of the financial year 2016-2017 (2QFY17). The company has reported 8% YoY and 10.5% YoY growth in revenues and net profits respectively.

    Apex frozen food Ltd. (IPO)

    Aug 21, 2017

    Should you subscribe to the IPO of Apex Frozen Foods Ltd?

    ITC: Numbers Go Nowhere in FY16... (Quarterly Results Update - Detailed)

    Jun 8, 2016

    ITC declared results for the quarter and year ended March 2016. During the year, the company's net revenues and profits rise by 1% YoY and 3% YoY respectively.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms