 "Sugar looks up, but mills not out of the woods just yet")
The sugar industry, which till a few months ago was reeling from cane dues and falling realisations, is showing signs of a turnaround because of an unexpected fall in production and improvement in the export outlook.
The fuel mixing programme is also picking up and for the first time in 14 years, the country is close to achieving a uniform five per cent ethanol blend. Till last year, the average blend was 2.5-3 per cent.
Sugar mills have agreed to supply 1,200 million litres in all of ethanol this year to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. The requirement for five per cent ethanol blending is 1,300 million litres. Last year, mills supplied 660 million litres.
Raw sugar futures in New York posted a five per cent gain for the year, their first annual advance since 2010. A Bloomberg survey of 18 traders said prices would continue to rise in the first quarter of 2016. This could improve prospects for Indian sugar mills. The share prices of most major sugar companies have been on the rise since October. The Bajaj Hindusthan stock has gained 34 per cent since October 1 and Triveni Engineering and Dhampur Sugars are up 86 per cent and 122 per cent, respectively(See chart).
Of the 3.2 million tonnes of sugar mills need to export in 2015-16 to avail the incentive of Rs 4.5 per quintal, 0.8 million tonnes have been contracted and 0.3 million tonnes shipped. M Vellayan, president of the Indian Sugar Mills' Association, told an industry conference India could export 1.2 million tonnes of white sugar and two million tonnes of raw sugar.
If that happens, the opening stock for the 2016-17 season that begins in October will be 6.7 million tonnes, 26.4 million tonnes less than the current year.
Sugar mills have also managed to reduce their cane arrears to Rs 5,400 crore by November from an all-time high of Rs 21,000 crore in March.
Despite the improvement in prices, the ISMA estimates the average ex-mill price for the last three months is still Rs 4-5 below the average cost of production of a kilogram of sugar. And there is still Rs 5,400 crore of cane arrears to be paid to farmers, not a small amount by any chance.
The fuel mixing programme is also picking up and for the first time in 14 years, the country is close to achieving a uniform five per cent ethanol blend. Till last year, the average blend was 2.5-3 per cent.
Sugar mills have agreed to supply 1,200 million litres in all of ethanol this year to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. The requirement for five per cent ethanol blending is 1,300 million litres. Last year, mills supplied 660 million litres.
Raw sugar futures in New York posted a five per cent gain for the year, their first annual advance since 2010. A Bloomberg survey of 18 traders said prices would continue to rise in the first quarter of 2016. This could improve prospects for Indian sugar mills. The share prices of most major sugar companies have been on the rise since October. The Bajaj Hindusthan stock has gained 34 per cent since October 1 and Triveni Engineering and Dhampur Sugars are up 86 per cent and 122 per cent, respectively(See chart).
Of the 3.2 million tonnes of sugar mills need to export in 2015-16 to avail the incentive of Rs 4.5 per quintal, 0.8 million tonnes have been contracted and 0.3 million tonnes shipped. M Vellayan, president of the Indian Sugar Mills' Association, told an industry conference India could export 1.2 million tonnes of white sugar and two million tonnes of raw sugar.
If that happens, the opening stock for the 2016-17 season that begins in October will be 6.7 million tonnes, 26.4 million tonnes less than the current year.
Sugar mills have also managed to reduce their cane arrears to Rs 5,400 crore by November from an all-time high of Rs 21,000 crore in March.
Despite the improvement in prices, the ISMA estimates the average ex-mill price for the last three months is still Rs 4-5 below the average cost of production of a kilogram of sugar. And there is still Rs 5,400 crore of cane arrears to be paid to farmers, not a small amount by any chance.