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Stocks of most sugar companies have been recovering after registering their 52-week lows in September-October, as sugar prices climbed following a fire in the Brazilian godowns.
Analysts sceptical
However, analysts are not yet betting big on sugar stocks. The uncertainty clouding the prospects of the next sugar season reflected in the mixed performance of listed sugar company stocks on Tuesday.
While EID-Parry and Dwarikesh Sugar Industries gained 3 and 5 per cent, respectively, Rajshree Sugar and Chemicals and Mawana Sugars slipped 4 per cent each.
Shree Renuka Sugars, Dalmia Bharat Sugar and Bajaj Hindusthan closed with marginal gains.
The industry produced 251 lakh tonnes of sugar during the season that ended September. Sugar consumption in the same period stood at 228 lakh tonnes. It is expected that opening sugar balance for this season that started last month is expected to be about 88.5 lakh tonnes, taking into account the previous year inventory and imports.
K. Shanthakumar, President, Karnataka Sugarcane Growers Association, said the acreage under sugarcane cultivation would drop by 10-15 per cent in Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka.
“The input cost for growing sugarcane has shot up substantially with the mark up in prices of chemicals and seeds. Labour wages have also gone up. Availability of water and electricity has become an issue, as well,” he said.
Caught unaware
The sharp fall in sugar prices has caught companies unaware. Farmers are still waiting to receive money for the cane they sold to companies. According to industry estimate, the State Advised Price for sugarcane has increased to Rs 280 a quintal in 2012-13 from Rs 165 a quintal in 2009-10, while the corresponding rise in sugar price had only been Rs 31 a kg in 2012-13 from Rs 28 a kg in 2009-10.
About 526 sugar mills crushed about 2,507 lakh tonnes of sugarcane -- about 2.5 per cent less than that in the previous year, when India crushed 2,570 lakh tonnes of cane to produce 263.42 lakh tonnes of sugar. In Maharashtra, the sugar bowl of the country, production was down 11 per cent at 80 lakh tonnes.
While the domestic sugar industry battles rising cane prices and fall in cane production, Shanthakumar expects large scale sugar imports to pose a major challenge.
“Between June and July, the country imported 2.75 million tonnes of sugar as prices in the international markets fell sharply. While farmers are left in the lurch, companies may import cheap sugar and make a killing,” he said.
>suresh.iyengar@thehindu.co.in
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