Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains!

Dhampur Bio call yesterday was informative in many aspects:

1. With SS22-23 as base year, Govt has flexibility to play with 10+ M Tons of sugar (export 6.4M, syrup/cane juice diversion 3.8M) to ensure lack of cane doesn’t result in less sugar (and hence sugar price rise). It might be even slightly more as B-Heavy molasses conversion to ethanol has also been “banned”, but offset by “1.7M Ton cane juice” allowed for ethanol conversion.
2. Management doesn’t expect sugar price to go up a lot even after elections.
3. Dhampur Bio recovery set to improve ~0.85% more vs last year due to higher crushing (they were guarded about numbers) and disease cleared from last year.
4. No expectation of more cane juice conversion even next sugar year.

My take-aways:

1. Dhampur Bio recovery improvement might offset the rise in input cane cost from UP SAP increase.
2. Profitability (high essentially due to cane juice/B-Heavy ethanol from last 2 years) to be muted for all mills in SS23-24 & SS24-25, might be offset by Govt raising minimum selling price of sugar if profits gets too low and mills can’t pay farmers on time.
3. No run-away sugar profits either this or next sugar year (as @Mehnazfatima foresaw).
4. Govt may be willing to take a hit on EBP even next year, or with enough stocks allow EBP at the cost of sugar exports.
5. Sugar mills profitability were because of both exports and EBP in previous years.
6. Any gains after 2 years will be based on betting on mills that will/are:
   a) improving crushing capacity + cane availability (Dhampur Bio)
   b) have spare distillery capacity + cane availability (Dhampur Bio, Dalmia)
   c) have spare multi-feed distillery capacity (Dalmia)

Looks like Dhampur Bio may be a good potential turn-around candidate.