Fortnightly Gyan by Indian Sugar Guru, Yatin Wadhwana – Episode 3

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EXPORT INCENTIVES APPROVED, MARKETS TAKE THE NEWS IN THEIR STRIDE

The Cabinet Committee on Economic Affairs (CCEA) last week approved the incentive package on Sugar Exports. They agreed to an incentive of Rs 6,000 PMT on a quantum of 6 mln MT. While the details of the incentive package will be known this week once the Notification is issued, one assumes that it will be along the same lines as the previous incentive package with the incentive broken up into 3 separate elements and the Maximum Admissible Export Quantity (MAEQ) being allocated to the individual mills based on past 3 years production. Based on the formula, the allocation for Maharashtra and Karnataka is likely to decrease based on their past performance. However, given the increased production in both those states the trade in MAEQ Quotas is likely to be brisk.

Both the world market and the domestic market took this news in their stride with very little movement in any particular direction. The fact still remains that the world market needs some portion of the Indian exports to avoid a deficit and is also anticipating an increase in the Minimum Selling Price (MSP) of sugar in the Indian domestic market. (Although an increase in the MSP was ruled out later in the week by the Minister of Consumer Affairs, Food & Public Distribution, Mr Piyush Goyal in his address to the Indian Sugar Mills Association at it Annual General Meeting)

On the other hand, post the announcement, the domestic market continued to remain under pressure due to the ongoing crush. The only saving grace was that the prices seemed to stabilize at the lower end with end user demand emerging.

CONCERN ABOUT THE CANE CROP IN NORTH INDIA

There are reports emerging from UP, Bihar and Haryana about the condition of the crop being harvested currently. The reports are suggesting that both Field Yields and Sugar Recovery are lower than the last year. Although this impact is on the Ratoon crop being harvested, the considered view is that it will impact the Plant cane that will be harvested in the new year as well. The combined effect could result in a crop reduction of 15% in the Northern states.

On the other hand recoveries in Maharashtra and North Karnataka seem to be hitting record high levels, with some areas reporting Recoveries in excess of 12% (against normal recoveries at this time of around 11%). This will help offset some of the crop loss in the North. Nevertheless, we may not see the record sugar production being predicted just 2 weeks ago.

COMMENT ON AN EDITORIAL CARRIED BY THE ECONOMIC TIME ON 21st DEC 2020, WRITTEN BY ASHOK V DESAI

I read a piece titled “A Sweet Little Problem” by Dr Ashok V Desai on the Editorial Page of The Economic Times today. Now Dr Desai is a very senior and seasoned Economist who has served the country alongside people like Dr Manmohan Singh, Montek Singh Alhuwalia, N K Singh, et al. However, I found this piece to be well below par from such an eminent person. It seemed as though he wanted to put across a point, that India is now an Agricultural Surplus Country and that it should become a major exporter of this Agri Surplus without Govt. intervention. In trying to convey this idea he makes some factually incorrect statements about sugar prices, sugar trade flows, the WTO cases and the sugar industry. The charitable view is that the article was written on his behalf by one of his students.

Click here to read Episode 1 
Click here to read Episode 2

Indian Sugar Industry Guru – Mr. Yatin Wadhwana is a strategic consultant and trader with over 35 years of experience. He is Director at Gradient Commercial Pvt. Ltd. which undertakes strategic trades, consultancy and advisory roles. Apart from sugar, he has also been involved in Supply Chain Management, Logistics and the trade of other agri-commodities including wheat, rice and soyabean.

To get in touch with Mr.Yatin Wadhwana write on yatinwadhwana@gradient.biz

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