Sugar prices to remain subdued next year

The prices will remain under pressure owing to bumper production (230 lakh tonne). The only hope is co-generation and ethanol. 

In 2006, the acreage of sugarcane in the country increased to 44.4 lakh hectare from 42.8 lakh hectare in 2005. More farmers turned to cane cultivation as a result of incentives, besides, a good cane price. However, there may be no significant increase in acreage next year. 

“The significant increase in acreage that we witnessed this year will not happen next year. But acreage should not go down either. Sugar price is likely to stabilise in the range of Rs 1550-1650 per quintal. If ethanol blending succeeds, it will emerge as a good source of revenue. In addition, cogeneration of power will be an important area to watch out”, said Sanjay Tapriya, director (finance) of Simbhaoli Sugar Mills. 

The government is keen on taking the ethanol blending to 10 per cent by June 2007. If it is achieved, sugar mills will have an assured income. However, things are not very bright here. The 5 per cent blending is yet to take off nationally and has missed three deadlines. 

“Sugar price will continue to be under pressure as a result of bumper production. If we are able to export significant quantity, the price may recover marginally”, said Vinay Kumar, managing director, National Federation of Cooperative Sugar Factories. 

“As the farmers got good cane price last season, they will continue to grow more cane and acreage may go up. However, there is no possibility of price rise, both nationally and internationally. Mills, that have diversified into cogeneration, will have an edge over the ones without it”, said SL Jain, director general of Indian Sugar Mills Association (ISMA). 

The profits and revenues of sugar companies over the next 3-4 quarters are expected to suffer. Balrampur Chini Mills and Dhampur Sugars recently announced declines in quarterly profits. 

Payments to farmers by the mills can also be delayed in the current season as a result of the softening sugar prices. 

Source: business standard