EVEN THOUGH SUGAR SPECULATORS LIQUIDATED LONG POSITIONS UNLIKELY PRICE COLLAPSE
sugar

EVEN THOUGH SUGAR SPECULATORS LIQUIDATED LONG POSITIONS UNLIKELY PRICE COLLAPSE

Jayant Agro Organics Ltd

*Firmness in international prices was expected to continue for the next 3-4 months

*India have manufactured 30.36 million ton sugar till May 15


Sugar speculators liquidated long positions and signs the market remains well supplied. Dealers said while funds might continue liquidating long positions near term, even though a large-scale price collapse was unlikely, with the market still underpinned by worries over Brazil's cane crop and soaring ethanol prices in the world.

Mumbai based sugar trader added that the market is well supplied for now and the futures curve structure is weak, so funds are unlikely to reinstate their long positions for the time being. Brazil's sugar production fell 25% late in April compared with a year earlier as cane agricultural yields lag last year's by more than 10% as well as by the ethanol price parity with sugar in the country.

July raw sugar up at 17.18 cents a pound (454 gram) on Tuesday, recovering after hitting a one-month low of 16.55 cents on Monday. August white sugar up at $449.40 a ton. Rains over most of the cane fields in Brazil in coming days could delay the harvest, dealers said, but are positive for development of the cane to be processed late in the crop.

International prices have touched a 4-year high as the white sugar prices in London averaged $461.8 per ton and raw sugar prices in New York averaged US cent 17.4 cents. Analysts said the firmness in international prices was expected to continue for the next 3-4 months unless output from the other major sugar producers come in for the next season 2021-22.

Sugar mills in India are demanding a hike in the minimum selling price to enable them to clear the dues to the farmers cane arrears stood at Rs 22,900 crore till February of the 2020-21 marketing season (October-September), higher than Rs 19,200 crore in 2019-20, according to government data. Rising output cost have caused ex-mill prices to fall to Rs 31-33 per kg, almost to the levels of the minimum selling price (MSP).

Which was last fixed in February 2019, seems to be the only realistic way to ensure that mills improve their cash flows and can effectively reduce the cane price arrears of farmers faster, The Indian Sugar Mills Association (Isma) said. The government, meanwhile, has cut the export subsidy to Rs 4,000 per ton from Rs 6,000 per ton in view of firm global prices. However, this comes at a time the mills have exported 95 per cent of the quota of 60 lakh ton quota set by the government.

The mills across the country have manufactured 30.36 million ton till May 15 of the ongoing 2020-21 marketing season, up 14.43% from 26.53 million ton in the year-ago period. Production has surpassed Isma’s estimate of 30.2 million ton for the 2020-21 marketing season. In the last marketing season, the country’s sugar production stood at 27.42 million ton.

(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 25-5-2021

Riddhi Siddhi Bullions Ltd

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