Indian sugar exports are expected to be the only saviours in easing overheated global prices due to shortage predictions. The future of sugar stocks depends on when the govt allows exports and how much
Just about everything seems to be going right for sugar prices. In New York, raw sugar prices reached a 29-year high. Australia has said that it could produce its smallest sugar crop in 20 years because of heavy rains. Brazil, a key sugar producer, is facing a dry spell in key parts coupled with loading problems in its ports. India on the other hand is going to produce a lot more than it initially expected and is in a position to export some of its surplus.
India is at the centre of it all for some time now. In February, when it was feared that sugar production in India would be a dismal 15 million tonnes (MT), sugar prices the world over soared. Then came the news that it was not going to be so bad (about 19MT) and sugar prices fell drastically. But not for too long. Once again sugar prices are soaring on speculation that there will be a deficit in global sugar supplies against the predictions of a 2.5MT surplus earlier.
India is in a position of power with a good monsoon under its belt. With cane production expected to be around 350MT, experts believe that India can easily produce about 25MT of sugar now. This, coupled with leftover stock from last year will make our end-of-the-year sugar position at around 32MT. Not surprisingly, sugar producers are pushing for opening up exports in a big way. In FY08 (a good production year) India exported around 5MT of sugar.
The speculation is that the Indian government will soon free up sugar exports and permit 2MT under the Open General Licence. Millers believe India will export at least 3MT this year.However, things are not that simple. India is facing a delayed crushing season this year as there is no accord between cane producers and millers over cane prices (although this is not unusual). Crushing is expected to begin in another 10 days if all goes well. In UP, a key sugarcane-producing state, the government has fixed the minimum price of cane at Rs210 per quintal. In general, what the millers pay to cane-growers is above this price anyway.
But this time the growers seem to be demanding Rs280 per quintal, a price which sugar millers claim is not viable. Last year, due to a shortfall, mills did pay these kinds of prices to producers.So far, retail sugar prices (which had touched Rs50 per kilogram this year) have remained at low levels of Rs30. With food inflation just starting to cool down in India, there is a worry that the government may take a call about not permitting too much export to maintain prices. However, so far, the market opinion is that agriculture minister Sharad Pawar will push for aggressive exports.
Meanwhile, it looks like sugar stocks will continue to surge. Shree Renuka is trading at Rs107 levels, still some way off from its year high of Rs124 in January. EID Parry has already touched a new high of Rs567 yesterday. Triveni is at Rs129, still below its high of Rs144 in March. Both Bajaj Hindusthan and Balrampur Chini are way below their highs of Rs243 in January and Rs150 in November 2009.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).
The domestic market is likely to see a flat-to-opening today on mixed global cues. The weekly food inflation data will also provide some direction to the market. The US markets closed higher as signs of optimism in the country’s economy spurred investors to make fresh moves. The Asian pack was mixed in early trade ahead of economic data to be announced by China and the meeting of Group of Twenty (G20) leaders, which gets underway in Seoul Korea today. The SGX Nifty was down 24.50 points at 6,285.50 against its previous close of 6,310 on Wednesday.
The market opened lower yesterday, tracking unsupportive global cues. Volatility continued with the indices moving on both sides of the neutral line on quite a few occasions. Every move into the green was followed by a dip into the negative territory. However, the broader indices stood firm trading with good gains. The see-saw continued unabated in the post-noon session with the indices touching the day’s lows towards the close of trade but the market managed to end the session just above that figure.
The Sensex ended 56.77 points (0.27%) down at 20,875, struggling hard to regain the highs seen last week. The Nifty settled at 6,275, down 25.85 points (0.41%).
Wall Street settled higher on Wednesday on positive economic data and as the dollar took a breather after four sessions of gains. Meanwhile, the Federal Reserve will conduct 18 open-market operations from 12th November through 9th December. The central bank is buying an additional $600 billion of Treasuries through June and expects to reinvest $250 billion to $300 billion of proceeds from mortgage-backed debt and agency securities into Treasuries. Besides, the number of workers filing for initial jobless claims fell by a greater-than-expected 24,000 to 435,000, the lowest level in four months.
The Dow added 10.29 points (0.09%) to close at 11,357. The S&P 500 rose 5.31 points (0.44%) to 1,218. The Nasdaq gained 15.80 points (0.62%) to close at 2,578.
Markets in Asia were mixed in early trade ahead of the announcement of economic data by the Chinese government. The two-day G20 meet, which gets underway in Seoul, will also provide cues to the regional bourses, especially in terms of currency and banking regulations.
The Hang Seng gained 0.53%, the Nikkei 225 was up 0.29% and Straits Times rose 0.23%. On the other hand, the Shanghai Composite declined 0.14%, the KLSE Composite shed 0.44%, the Seoul Composite fell by 0.03% and he Taiwan Weighted was down 0.03% in early trade. The SGX Nifty was down 24.50 points at 6,285.50 against its previous close of 6,310 on Wednesday.
Buoyed by robust tax collections so far, the government has exuded optimism that it will surpass tax collection target of Rs7.45 lakh crore this fiscal.
“Revenue target for this year is Rs7.45 lakh crore and I see no reason why we should not achieve it... As a matter of fact if things go as they are, we expect to make a modest increase over the targets,” revenue secretary Sunil Mitra told reporters on Wednesday.
He, however, refused to give any revised figures and said no new numbers have been fixed as of now. Mr Mitra said that during April-October, the government has collected over 50% of the budgeted target.
Besides being a 'trusted lieutenant' of the Gandhi family, Prithviraj Chavan’s 'clean' image and Maratha caste tilted the balance in his favour. Surprisingly the NCP also changed its stance on caste-equation and opted to appoint party chief Sharad Pawar's nephew as new deputy CM
As correctly predicted by Moneylife (http://www.moneylife.in/article/78/11026.html), Congress chief Sonia Gandhi has selected 'trusted lieutenant' Prithviraj Chavan as the next chief minister (CM) for Maharashtra. He will take over as the 23rd CM of the state after incumbent Ashok Chavan was asked to resign due to alleged involvement in the Adarsh housing society scam. Taking a cue from the Congress, its partner the Nationalist Congress Party (NCP) also decided to rope in Ajit Pawar as deputy CM, replacing Chhagan Bhujbal.
Following the ouster of Ashok Chavan, the names that were doing the rounds were those of Prithviraj Chavan, Sushilkumar Shinde, Vilasrao Deshmukh, Mukul Wasnik, Balasaheb Thorat as well as the father-son duo of Balasaheb Vikhe Patil and Radhakrishna Vikhe Patil. Congress general secretary Rahul Gandhi, who was supposed to have supported Ashok Chavan earlier, said that the party wants someone "who is clean and can deliver". This shut the doors for Vilasrao Deshmukh.
Although Mr Shinde is a 'tried and tested' lieutenant of the Gandhi family, he was also named in the Adarsh housing scam and hence was sidelined for the CM's post.
Earlier in 1998, the Vikhe Patil father-son duo shifted their alliance to the National Democratic Alliance (NDA) to become Union and state ministers, respectively. In addition, it is alleged that a firm related with the Vikhe Patil family owes state power distribution company (Mahavitaran) about Rs1,800 crore. Both these factors went against them.
Mr Wasnik shares good relations with Rahul Gandhi, but is seen more as the party's man in Delhi and has no real mass base in Maharashtra. He and Mr Thorat were the lightweight candidates in the fray and would have been easy prey for the Nationalist Congress Party (NCP), which shares power with the Congress in Maharashtra.
Over the years, the NCP has increased its base in the state and is very eager to root out the Congress from many constituencies.
Therefore, the question remains, what tilted the balance in favour of Prithviraj Chavan? His family shares a very good equation with the Gandhi family and his mother Premalakaki Chavan was the state Congress chief of Maharashtra. Besides being a trusted lieutenant of the Gandhi family, Mr Chavan comes with a clean image and belongs to the Maratha caste.
Traditionally, the Maratha lobby has ruled Maharashtra most of the times and the same lobby is still dominant in state-level politics. Thus, the Congress high command replaced Ashok Chavan, a Maratha, with another Maratha, in order to keep the equations in the state-level politics intact.
According to a PTI report, Ajit Pawar, nephew of NCP chief, is likely to hold Home portfolio, besides Energy. NCP leader and civial aviation minister Praful Patel said, "After the meeting began, the first proposal was by Bhujbal that Ajit Pawar be named new legislature party leader. That made our job easy. Everyone applauded and welcomed the announcement."
Congress-NCP leaders will meet Maharashtra Governor K Sankaranarayanan on Wednesday night to stake claim to form the new government.
Prithviraj Chavan: A brief profile
Born on 17 March 1946, Prithviraj Chavan has a BE (Hons) from BITS, Pilani and an MS from the University of California, Berkeley (USA). He pursued higher studies at the University of California and spent some time working in the field of aircraft instrumentation and designing audio recorders for anti-submarine warfare in the US before returning to India and entering Indian politics. He is married to Satvasheela and has one daughter and one son.
MAHARASHTRA AT A GLANCE
Since 1 May 1960, Maharashtra has seen 19 chief ministers and except Vasantrao Naik, no other CM was able to complete his five-year term in office. Vasantrao Naik, from the Vidarbha region, was also the longest serving (about 12 years from December 1963 to February 1975) CM of Maharashtra. Vilasrao Deshmukh who was CM for two terms of about four years each follows him. NCP chief Sharad Pawar became CM for three times, but was unable to complete his full term in office.
With the exception of the Sharad Pawar-led Progressive Democratic Front (PDA) regime of about two years and the Shiv Sena-BJP combine's term of four-and-a-half years, Maharashtra has been ruled by the Congress since 1960.
At present, the Congress has 82 and the NCP has 62 members in the 288-member house.