“High prices of crude will act as a cap on the sugar market” – Kiran Wadhwana

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The sugar glut in the market along with depressed global sugar prices has been haunting the world sugar industry. Major countries involved in sugar business are facing heat due to the current industry scenario. To understand the insights of the situation, Mr.Kiran Wadhwana, Director, Comdex India Ltd., in an interview with ChiniMandi.com shares his views.

Q.There are reports that the global availability of sugar in the current cycle might continue to decline compared to the previous years. Having a look at Brazil, there has been a weak performance of sugar prices while oil has appreciated more than 30% in the international market since the beginning of the year. Will this weigh on the prospects of manufacturing the sweetener? 

A. What really surprised the word during the 2018-19 (May/April) Brazilian crop is the extent of the switch from sugar to ethanol. In the past it was assumed that the maximum switch could be only about 10%, however, we saw a switch of more than 15% in favor of Ethanol, thereby reducing the CS Brazilian crop from 33 million MT in 2017-18 to 26 MMT in 2018-19. Given the strength of Crude prices, the switch back to sugar in Brazil should be marginal, say about 1 million MT. However, one must not forget that the high price of Crude will act as a cap on the market and if NY No. 11 cross 13 cents for a sustained period of time, we could see a bigger switch back to sugar.

Q.Will Brazil yet remain to play a major role in the global availability of sweetener, sustaining the balance of supply and demand?

A. Brazil is probably only structural exporter that has been able to switch off the supply of sugar thanks to their ethanol program and given the size of their cane crop (around 600 million MT) they will continue their leading role in the sugar balance of the world.

Q. Guatemala, Australia and Brazil and now Thailand have conglomerated to drag India to the WTO for its policies on sugar. What are your views on this scenario?

A. The case at the WTO has challenged the very basis of the Indian sugar policy followed by the Indian Govt. of fixing cane prices (since 1995, the year when India signed the Agreement on Agriculture) and the more recent assistance on Cane Dues and transport subsidy. While the complaint is very technical and Govt. will be responding after taking proper legal advice in the matter, I feel that the complainants want to send out a message to all the members that they will not allow market-distorting subsidies to be given by member states. In this case, my personal view is that there will be a negotiated settlement and may well bring much needed structural reforms in the sugar sector in the country.

Q. How do you see the future of the sugar industry in Europe and the UK market after Brexit?

Now that we are looking at no deal Brexit, we need to see what UK will do in terms of imports. UK normally requires 600 K MT of imports and about 300 to 350 K MT came from France alone. How will this trade be impacted after April 12th? Will UK have trade deals with other countries like Brazil, India, and Thailand, etc. giving them preferential access to its markets? Even after a no deal Brexit, will there be some sort of lower tariff for EU into UK? These are the issues that will shape the sugar industry in EU and UK after Brexit.

Q. While looking at the Indian Sugar Industry’s export campaign, what numbers do you see being exported out of 5MMT?

I expect about 3 to 3.5 MMT out of the 5 MMT to be exported in 2018/19 sugar year.

Q. Looking at the current scenario on production and next season crop estimates, what are your views on exports of sugar?

With the lower crop in Maharashtra and North Karnataka due to drought and higher ethanol capacity coming on line in Uttar Pradesh for 2019/20 season, my view is that production will be 27 Million MT. This is assuming that Uttar Pradesh planting and the 2019 monsoon are normal.

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