In my humble opinion, the sugar cycle can be desribed in economic terms as the cobweb cycle / hog cycle.
The events which happened last year are more important for production next year.
The was deficit rainfall in August…and excess rainfall in September 2023…the issue is how will this impact the Sugar production in the present sugar season which has already started and in the next sugar season.
For the sugar production in the present season, the sugarcane yield may be affected to some extent due to water shortage and disease…but we must remember that sugarcane is a very very sturdy crop…the overall production does not get affected hugely due to the above adverse conditions…there may be a fall but it may not be more than 1-1.5 million tons.
Insofar as next sugar season is concerned, the planting in Maharashtra and Karnataka starts in March and end by May…the defining criteria for farmers is whether there is water available in irrigation reserviors in March…i think the excess /adequate rainfall in Sept 2023 will ensure that there is water availablility in march 2024 and may not lead to reduction in suagrcane sowing in March / April 2024 and hence the sugar production may not be in a huge deficit in the next sugar season too.
If there is a developing El Nino which may cause a drought in the monsoon season of 2024, that will in effect impact the sugarcane sowing in March April 2025…and frankly speaking its no use for retail investors to predict that long in a highly dynamic environment. I would rather let the market make its decision and follow the collective wisdom of the market in such cases. As of now the verdict of the market is that…there is no sign of bull run in sugar stocks or sugar price which is stagnant since 2017 @ 35 rupees per kg in Delhi wholesale market.
Still if anybody wishes to play the sugar theme, i think Triveni Engineering, Baja Hindusthan, and Dalmia sugar are good bets as of now…uttam sugar too is doing quite well but it has already run up a bit
International sugar price as reflected in Sugar 11 contract is very bullish and in uptrend…it can go up hugely to even 40-50 cents…but the Govt of India has shut out the the access to international market…otherwise, ISMA used to very cleverly overestimate the sugar production and force Govt to allow export of sugar …the Govt no longer appears to be falling for that bluff and ISMA is no longer bluffing about the sugar production estimates…but still i would scale down ISMA estimates by 1-1.5 million tons atleast
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