What's the outlook for Sugar? Experts opine

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What's the outlook for Sugar? Experts opine

Dhruv M Sawhaney, CMD at Triveni Engineering and Industries and Jonathan Kingsman, MD at Societe J Kingsman give a clearer perspective on the ethanol story and where international prices of sugar are headed.

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Q: At this point in the North Indian region, how low have prices gone to? If indeed you can start exporting, what sort of realisations do you expect to get?

Dhruv: I think that exports will mainly be from the south and from the west. In the north, we have a price differential of about Rs 1-1.5 versus the south. Also, we are about a 1000-kilometer away from the port.

So overall, India can easily export a million to two million tonne. As far as pricing is concerned, at the moment we are able to export a surplus production of a million and a million and half. 

It is extremely important that we export it now because we are going to be competing with Thai sugar especially for buyers such as Indonesia. So if we can start this export in December-January and get atleast half a million to a million tonne offers in the first three months, I think prices would not dip too much in the first half of 2007.

In the north, we are going to have increased cane prices. You already have an agitation in Maharashtra, so even though prices may be having a slight dip in the first half of next year by the end of 2007, I think we are going to see a revival in sugar prices. And certainly 2008 is a very positive year for sugar.

Q: For the next four quarters then, from what you are saying, would sugar prices then generally stick to about Rs 16-17 as a mean? If that be the case with where cane prices are headed, would you expect a challenging four quarters from the sugar side of the business, in terms of profitability?

Dhruv: I think you have got the price almost exactly where I would have said as an average on all India basis. A little higher than Rs 17 in the north and a little lower in the south- that is probably right.

I think there will be a differentiation between players who have diversified, who are also making ethanol and who are co-generating power and these will be players who will be more efficient today. They will have a revenue basket, which consists not just sugar but also power and ethanol as well.

The recent tenders of ethanol have been very encouraging. The statement that by June next year they are going to go to a 10% blend, will help the viability of those players in the sugar industry, which have diversified out of sugar into ethanol and power.

Q: Do you plan to ramp up your ethanol facilities as well and do you think prices offered at this point for ethanol is a fair one?

Dhruv: Yes. Our distillery of 160 kilolitres per day will come on stream at the end of January, and I think the price is fine for the moment.