MCX Sugar seasonality Chart
— For last 10 years, Sugar prices have rallied 9 out of 10 years in the month of October followed by correction in Nov (6 out of 10 years) and Dec (6 out of 9 years)
— Feb, Mar and May remains the weakest period in terms of sugar price
— While Aug, Sep and Oct are stronger period
For CY15, 4 months have seen positive months for sugar prices – worst year was 2013 where only 3 months where sugar prices were in positive trend. On an average, every calendar year 5-6 months see poisitve trend in sugar prices followed by decline in sugar prices…
to highlight further..from Dec-Jun period, only two months see positive trend which suggests sugar prices at most can sustain at these levels or closer to cost of production
Things which can be explained for such rally in sugar stocks is:
1. Sugar price improvement by 20-30% from low in August (Seasonality chart suggest 9 out of 10 years, sugar price have rallied in the month of October – which explains festive seasonality) 2. Ethanol blending and excise exemption 3. 1-1.5MT lower production expected in upcoming sugar season 4. And, 4MT sugar exports mandated by Govt to reduce sugar inventory of current year’s surplus
Now from here onwards, key trigger for sugar sector will be UP SAP which is going to get announced in few weeks from now as UP will start crushing from Nov-end and Dec onwards. With the SAP price, one need to track the sops UP govt will add to it – last year they provided assistance of Rs 280/quintal which was linked with sugar price capped at Rs 31/kg. So this year one need to see how much saving millers will get from the sops which will determine profitability of the companies for coming season. Also if sugar price firm up closer to cost of production then also companies will turn profitable.
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