@samir_brd
well said about commodity prices.
I think it is not possible to time the bottom (without luck). The cyclical downturn generally lasts for few years and varies from industry to industry. For sugar it is going on for sometime now, we are not at the beginning of the downturn. Now how long this continues is anyone’s guess.
Since the sugar companies are under lot of financial stress, the most important point to look is which company can survive the downturn that is which companies are unlikely to go bankrupt and have decent management .As per hearsay some of the sugar mills in eastern UP have already shut down. Many of the co-operative and small mills must already be under duress.
I invested thinking that as the mills are being forced to buy cane at high prices, the govt is likely to give some support to the sector. The govt did provide export subsidy but as it turned out due to surplus supply the international prices were not remunerative even with the subsidy.
But how long this can continue. Are we going to need sugar after 10 years – Yes. Are we going to let our sugar industry die, farmers suffer and import all our sugar – NO. The present situation is unlikely to continue for several more years as more mills will go bankrupt. Cane dues to farmers are already high and is likely that govt will want it to go higher. So some improvement in the sector should come. Hopefully.
However, i am not considering a scenario of high sugar prices, there will be lot of hue and cry and govt in all likelihood will remove subsidy and reduce import duties. Govt will not like sugar prices to go off limits, how much it can control ? I have no idea.
