Sakthi Sugars sees Rs 25-26 kg as 'comfortable price' band

M Manickam, MD of Sakthi Sugars believes Rs 25-26 per kg is the most comfortable range for the commodity right now. He feels the delay in crushing has led to a drop in the supply of the cane and will therefore affect the industry.

Sugar futures rose on Monday as speculators took positions, expecting a delay in cane-crushing in UP and Maharashtra – the country’s top sugar producing states. However, higher selling by mills following a government directive to mills to sell 4 million tonne of sugar in the open market during October and November, capped the gains.

At the National Commodity and Derivatives Exchange, the November contract for sugar shot up by Rs 137, or 3.95% to Rs 3,609 per quintal, with an open interest of 18,840 lots in afternoon trade. Meanwhile, the December contract rose by Rs 14, or, or 0.45%, at Rs 3,345 per quintal, in an open interest of 31,630 lots.

Market analysts attributed the rise in sugar prices at futures trade fresh positions by speculators supported by reports of a delay in cane crushing in key producing states.

"If the crushing gets delayed as it is going then we could look for a lower crop. I would think Rs 24 would be the maximum, something lower than Rs 24 is realistic," Manickam told CNBC-TV18 in an interview.

Below is the edited transcript of the interview on CNBC-TV18.

Q: There have been reports of agitations by farmers asking for Rs 300 a quintal for cane. Some of the front line stocks like Renuka, down about 3 percent; what is your feeling? Do you think Rs 300 is possible? What cane pricing could settle for this season?

A: Rs 300 is a bit of high pitch because if the cane price has to be Rs 300 the sugar price has to be Rs 45 and if the consumer is willing to pay Rs 45 then probably we can look at a price of Rs 30,  but it is a kind of high pitch. Probably they should be comfortable with Rs 25-26.

Q: All the leading stock prices have fallen, so do you think sugar cane prices are going to inch up across the world, across India in Uttar Pradesh, Maharashtra and Karnataka?  If yes, by how much do you expect the cane price to rise?

A: I don’t think it is going to increase too much because it is a game between the government and the farmers. I don’t think it will go beyond Rs 26- Rs 27 at the most.

Q: The same kind of prices might also spread to UP or will UP pricing be a tad lower because, after all they were not rain affected?

A: I believe Haryana has already announced the price which is around Rs 24-Rs 25 so UP will be in line with that. Normally in the north-west, Haryana has the highest price. We don’t think UP will be much higher. It is only Maharashtra and to do more with something beyond cane prices, lot more than fostering

Q: What about the SY13 projection? There are reports that it could be about Rs 24-Rs 24.50, do you think that is possible?

A: If the crushing gets delayed as it is going then we could look for a lower crop. I would think Rs 24 would be the maximum, something lower than Rs 24 is realistic.