The Hindu Business Line : Low output buzz props up sugar

Siel Ltd's `Mawana' and DCM's `Daurala' sugar are both quoting today at Rs 1,400 per quintal, compared to Rs 1,280-1,300 a fortnight back and Rs 1,215 on January 1. In short, ex-factory realisations have improved by almost Rs 200 per quintal since the start of the new year.

The current uptrend has been attributed to a host of factors. Primary among them is the expectation of a significant production decline in the ongoing 2003-04 sugar season (October-September) after an unprecedented five consecutive seasons of increase - from 128.52 lakh tonnes (lt) in 1997-98 to 155.39 lt in 1998-99, 182 lt in 1999-2000, 185.11 lt in 2000-01, 185.28 lt in 2001-02 and 201.45 lt in 2002-03.

There are various estimates of the extent of output decline doing the rounds now. The biggest fall in expected in Maharashtra.

During the last season, the State produced 62.19 lt, which, according to an official from the Maharashtra State Cooperative Sugar Factories' Federation, will plunge to about 35 lt in the 2003-04 season.

"Acute drought conditions along with a bad infestation of woolly aphids, has brought down cane output as well as sugar recovery levels.

``We expect only 300-310 lt of cane to be crushed this time, as against last season's 534 lt," the official said.

He noted that despite crushing beginning 15 days late in the first week of November this time, 70 out of the State's 129 working factories have already closed operations for the season. Inadequate rains will also have an impact on production in Karnataka and Tamil Nadu. The CMD of Thiru Arooran Sugars Ltd, Mr Ram V. Tyagarajan, estimates sugar output in Tamil Nadu to be in the region of 10 lt this season, against 16.44 lt in 2002-03.

"The failure of the South-West monsoon and not-so-good North-East monsoon has hit production in virtually all the major sugarcane growing areas of peninsular India.

Only Uttar Pradesh has not been really affected, courtesy the perennial rivers and extensive canal irrigation network there," he observed.

Besides, in UP, 42-43 per cent of the cane is used by gur and khandsari makers, implying that a decline in sugarcane production need not always result in a corresponding fall in sugar production.

It is this factor - reduced diversion of cane to alternate sweeteners - that has seen the State's sugar output go up from 37.29 lt in 1998-99 to 56.51 lt in 2002-03, even as sugarcane production has virtually stagnated.

But in spite of all this, "we see sugar production by mills in UP to fall to 50 lt in the current season", said Mr C.B. Patodia, Advisor, K.K. Birla Group of Sugar Industries.

The Director-General of the Indian Sugar Mills Association, Mr S.L. Jain attributes an additional reason for the improved price sentiments.

"There is lot of liquidity floating in the market today. Given the general over-valuation of stocks, there is a renewed interest in commodities, especially those that are trading at low levels.

``And since prices of sugar have been ruling at record lows till recently, it is an ideal commodity for speculators today," he said.